Price trend

According to the commodity market analysis system of SunSirs: As of February 27, the price of 0# zinc was 24,642 RMB/ton, a slight decrease of 0.83% compared with the zinc price of 24,438 RMB/ton on February 24.

Market analysis

Zinc prices traded in a narrow range, with the market caught in a stalemate between bulls and bears. At the beginning of the week, prices were pressured by inventories exceeding 200,000 tons; while there was cost support mid-week, slow downstream resumption of operations hampered price increases. Overall, the zinc market experienced a temporary imbalance last week, with supply exceeding demand, but the downside was limited by smelting costs, exhibiting a typical "ceiling and floor" characteristic.

Raw Material Side

Imported ore processing fees remained stable, and the raw material supply remained tight. In stark contrast to the accumulating finished product inventories, the tight supply situation in raw materials had not eased. Last week, the mainstream processing fee for domestic zinc concentrate remained stable in the range of 1,200-1,500 RMB/ton of metal, while the processing fee for imported ore fluctuated at a low level. Some mines in northern China had not yet fully resumed production, and the replenishment of imported ore was limited, so the tight supply of raw materials remained unchanged. This pattern of "tight raw material supply and loose finished product inventories" had significantly compressed the profit margins in the smelting sector, but it had also provided solid cost support for zinc prices.

Supply and Demand Side

The most prominent feature of zinc supply last week was the unexpectedly large increase in social inventories, a key factor suppressing zinc prices. As of Febraruay 27, social inventories had successfully surpassed the important threshold of 210,000 tons. Compared to the same period last year, this inventory level was significantly higher—during the Spring Festival, domestic zinc ingot inventories increased by 49,300 tons, with the increase exceeding that of the same period last year by 12,700 tons. Simultaneously, inventories on the Shanghai Futures Exchange (SHFE) also saw a substantial increase. Weekly inventory data released by the SHFE on February 27th showed that zinc inventories increased by 39,027 tons last week. This increase was among the highest in the non-ferrous metals sector, fully reflecting the significant pressure on delivery warehouses to receive inventory.

The spot market remained sluggish. Last week, the spot market was characterized by active selling by sellers and cautious purchasing by buyers. Holders generally quoted inflated prices while actual transactions were low, and even after multiple reductions in premiums and discounts, market activity remained weak. This "price-for-volume" approach fully reflected traders' urgent desire to reduce inventory under pressure. Downstream industries saw a slow recovery in operating rates, with the overall recovery significantly slower than in previous years.

Market outlook

Last week, the zinc market struggled to maintain a balance amidst intense competition between inventory pressure and cost support. In the short term, upward price movement lacks momentum due to a lack of demand-side support, while downward price declines are constrained by cost factors, making a significant drop unlikely. This oscillating pattern is unlikely to break in the short term. From a medium-term perspective, with the approach of the traditional peak consumption season in March, if inventory can be successfully reduced, zinc prices are expected to experience a period of recovery.

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