SunSirs: Zinc Prices Shifted Downwards due to Oversupply in September

Price trend

According to the commodity market analysis system of SunSirs, as of September 30, the price of zinc was 21,824 RMB/ton, down 1.14% from the price of 22,076 RMB/ton on September 1.

Analysis review

In September, Shanghai zinc prices declined again, showing a trend centered around mid-month—consolidation followed by a downward breakout. This was primarily due to the easing of macroeconomic factors, which allowed market trading to return to fundamentals. The weak performance during the peak consumption season was confirmed, with accumulated inventories suppressing prices. The domestic zinc ingot market exhibited an oversupply, with fundamentals characterized by internal weakness and external strength.

Regarding raw materials

In September, zinc concentrate import losses continued to intensify, and the import window was almost completely closed. Despite the expected arrival of previously locked-in zinc concentrate and long-term contracts, imports are expected to decrease significantly in October. During September, the domestic-to-domestic price ratio deteriorated, further widening the profit deficit from smelting imported ore. As a result, domestic smelters are increasingly preferring domestic ore. At the same time, to promote the sale of imported goods, the mineral trading industry has proactively increased import tariffs. Looking ahead to October, domestic tariffs are expected to decline slightly, while import tariffs may still have room for an increase.

Supply and Demand

Recently, zinc market prices showed a downward trend, impacting the smelting industry's profit margins. However, the revenue generated by byproducts from the smelting process remained considerable, keeping smelters' profits above 1,000 RMB/ton, thus maintaining high production enthusiasm. In September, equipment maintenance at some domestic smelters resulted in a decrease in domestic refined zinc production compared to previous months. However, as smelters that had previously undergone maintenance gradually resume production in October, domestic refined zinc supply is expected to increase moderately.

Since September, the domestic consumer market had shown no clear signs of recovery. Even during the traditional peak consumption season, various consumption data had fallen short of expectations, and market vitality needed to be further stimulated. Based on an analysis of the economic situation and consumption trends, it is expected that the domestic consumer market will still be unlikely to see a significant improvement in October and will likely remain stable but weaker overall.

Market outlook

In October, mines in northern China are expected to reduce or halt production, potentially leading to a decline in domestic zinc concentrate output. Accordingly, the processing charge (TC) for domestic zinc concentrate is expected to decrease slightly, while the TC for imported zinc concentrate may still increase. As smelters that underwent maintenance in October gradually resume production, domestic refined zinc supply may increase. However, domestic demand for refined zinc is unlikely to see a significant recovery.

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