According to the China Nonferrous Metals News, since the end of March, as sentiment in the precious and non-ferrous metals markets has improved, coupled with tightening supply from the mining sector and a recovery in demand, the central level of zinc prices has gradually risen. LME zinc futures have rebounded to levels close to the highs seen at the end of January this year, whilst SHFE zinc futures have recovered to above RMB24,000 per ton.

On the supply side, relevant data indicates that global zinc ore production in February stood at 964,300 tons, a month-on-month decrease of 2.8%; cumulative production for January–February reached 1,956,000 tons, representing a slight year-on-year increase of 3.5%. Affected by geopolitical conflicts, processing fees for imported zinc ore have fallen rapidly. As of last week, the imported zinc concentrate TC index had fallen to -$28.5 per dry ton, whereas at the end of February the index stood at over $20 per dry ton.

Although domestic mines are gradually resuming production, smelters are actively snapping up domestic ore driven by economic considerations due to tightening supplies of imported ore. At the same time, supplementary revenue from by-products has bolstered smelters’ demand for raw materials, leading to widespread reductions in processing fees for domestic ore across the country. In April, the national average processing fee for domestic ore fell to RMB1,250 per metric ton of metal. As of the end of March, smelters’ raw material inventories stood at 286,000 metric tons of metal, with a stock-to-days ratio of 20.6 days, a significant decline from February.

In February, global refined zinc production stood at 1.0465 million tons, a month-on-month decrease of approximately 8%, resulting in a monthly surplus of 49,600 tons; for January–February, the cumulative surplus was 28,000 tons. Following the disruption to shipping lanes through the Strait of Hormuz, European zinc smelters have not yet implemented large-scale production cuts, but rising energy prices have further strengthened cost-side support. In the first three months of this year, China’s zinc ingot output reached 1.839 million tons, a year-on-year increase of 4.1%. Although zinc ore processing fees remain low, the persistently high price of the by-product sulphuric acid has provided a significant boost to smelters’ profits; consequently, their production enthusiasm remains high, and the likelihood of large-scale production cuts is low. In the short term, sulphuric acid prices are expected to remain at elevated levels. In April, some smelters will undergo routine maintenance, though the impact is expected to be limited.

Since late March, the pace of refined zinc destocking in the domestic market has slowed. The latest data shows that total zinc inventories on the Shanghai Futures Exchange (SHFE) stand at 146,100 tons, with warehouse receipts at 101,300 tons; both figures are higher than the levels recorded during the same period over the past three years. Spot supply remains relatively ample, with spot prices in Shanghai, Guangdong and Tianjin trading at a slight discount. However, LME zinc inventories have continued to decline since mid-March, with overall inventory levels remaining low. Spot prices for 0–3-month contracts are trading at a slight discount, indicating a slight tightening of overseas supply.

Since April, operating rates at primary zinc processing enterprises have remained high. Last week, galvanized pipe manufacturers largely resumed full-capacity production; demand for telecommunications tower orders remained robust; and export orders for transport, telecommunications towers and profiles performed well, whilst major manufacturers in the die-cast zinc alloy and zinc oxide sectors maintained stable order volumes. Regarding end-user demand, from January to March, the cumulative year-on-year decline in new housing construction area narrowed, whilst infrastructure investment grew by 8.9% year-on-year. In April, production schedules for air conditioners, refrigerators and washing machines saw a slight year-on-year decline, though an improvement is expected in May. In the first three months of this year, growth in automobile production and sales fell short of expectations. Affected by a high base effect and the policy halving the purchase tax on new energy vehicles, automobile production and sales in March fell by 3% and 0.6% year-on-year respectively. Specifically, new energy vehicle production fell by 3.6% year-on-year, whilst sales rose by 1.2% year-on-year.

Overall, geopolitical tensions will continue to disrupt the market, and attention must be paid to shifts in sentiment within the non-ferrous metals market. In terms of supply and demand, tight supplies of imported ore have led to strong demand from smelters for domestic ore, with processing fees for domestic ore remaining at low levels. Supported by the price of by-product sulphuric acid, domestic smelters currently have no significant plans to cut production. Domestic refined zinc inventories have remained largely unchanged, whilst overseas market supplies are showing signs of tightening. Downstream demand has generally been favourable, with supply and demand dynamics providing some support for zinc prices.

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