Since late March, with the improvement in market sentiment towards precious and non-ferrous metals, as well as the tightening of supply at the mining end and the recovery in demand, the central range of zinc prices has gradually risen. The LME zinc futures price rebounded to close to the high level at the end of January this year, while the SHFE zinc futures price rebounded above 24,000 RMB per ton.

From the supply side, relevant data shows that in February this year, the global zinc ore output was 964,300 tons, a month-on-month decrease of 2.8%; from January to February, the cumulative output was 1.956 million tons, a slight year-on-year increase of 3.5%. Affected by geopolitical conflicts, the processing fees for imported zinc ore have dropped rapidly. As of last week, the imported zinc concentrate TC index had fallen to -28.5 US dollars per dry ton, while the index remained above 20 US dollars per dry ton at the end of February.

Although domestic mines are gradually resuming production, affected by the tightening supply of imported ores, smelters have actively snapped up domestic ores driven by economic considerations. Meanwhile, the supplementary income from by-products has also supported the smelters' demand for raw materials, leading to a general reduction in the processing fees for domestic ores across various regions in China. In April, the national average processing fee for domestic ores dropped to 1,250 RMB per metal ton. By the end of March, the raw material inventory of smelters stood at 286,000 metal tons, with available inventory days of 20.6, a notable decrease compared to February.

In February, the global refined zinc output stood at 1.0465 million tons, a month-on-month decrease of about 8%, with a supply surplus of 49,600 tons in that month; from January to February, the cumulative surplus was 28,000 tons. After the obstruction of the Strait of Hormuz waterway, no large-scale production cuts have occurred at European zinc smelters, but the rise in energy prices has further strengthened the 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 the zinc ore processing fee is at a low level, the price of by-product sulfuric acid has remained persistently high, providing an important supplement to the profits of smelters. Therefore, their production enthusiasm remains high, and the possibility of large-scale production cuts is low. In the short term, sulfuric acid prices are expected to remain high. In April, some smelters will conduct overhauls as part of their regular maintenance, with the expected impact being limited.

Since late March, the pace of destocking of domestic refined zinc has slowed. Latest data shows that the total zinc inventory on the Shanghai Futures Exchange (SHFE) is 146,100 tons, and the warehouse receipt volume is 101,300 tons, both higher than the levels of the same period in the past three years. The spot supply is relatively tight, and the spot prices in Shanghai, Guangdong, Tianjin and other places show a slight backwardation. However, the London Metal Exchange (LME) zinc inventories have continued to decline since mid-March, with the overall inventory level remaining low, and the 0-3 spot price is in slight backwardation, indicating a slight tightening of overseas supply.

Since April, the operating rate of primary zinc processing enterprises has remained at a high level. Last week, galvanized pipe factories basically returned to full capacity production, with strong orders for iron towers, good performance of export orders for transportation, iron towers, profiles and other products, and stable orders from large enterprises in the die-cast zinc alloy and zinc oxide industries. In terms of terminal demand, the cumulative year-on-year decline in the floor space of new housing starts in China narrowed from January to March, and infrastructure investment increased by 8.9% year-on-year; in April, the production scheduling of air conditioners, refrigerators and washing machines dropped slightly year-on-year, and it is expected to improve in May. In the first three months of this year, the growth rate of automobile production and sales was lower than expected. Affected by the high base and the halving of the purchase tax rate for new energy vehicles, the production and sales of automobiles dropped by 3% and 0.6% year-on-year respectively in March. Among them, the output of new energy vehicles decreased by 3.6% year-on-year, and the sales volume increased by 1.2% year-on-year.

Overall, the geopolitical situation will continue to disrupt the market, and it is necessary to pay attention to changes in sentiment in the non-ferrous metal market. On the supply and demand side, there is a tight supply of imported ores, smelters have a strong willingness to snap up domestic ores, and the processing fees of domestic ores remain low. Supported by the price of by-product sulfuric acid, domestic smelters have no obvious plan to reduce production. The inventory of domestic refined zinc has changed little, while the supply in the overseas market is showing a tightening trend. The overall performance of downstream demand is favorable, and the supply and demand situation provides certain support for zinc prices.

SunSirs has been continuously tracking price data for over 200 commodities for nearly 20 years, please contact support@sunsirs.com for subscription.