Shanghai zinc does not have the condition of deep fall

After the Spring Festival, the non-ferrous plate has ushered in a surge, but after February 22, began to pull back. According to the closing price, compared with the varieties with a greater decline in the plate, such as tin and nickel, which fell 11.15% and 5.57%, the main price of Shanghai zinc only fell from 21,980 yuan/ton on February 22 to 21,340 yuan/ton on March 2, a decline of only 1.5%. Whether can zinc price fill drop to turn down?

Supplies are scarce

From the mining point of view, as one of the major exporters of zinc, Peru has extended the state of emergency until March 31 because of the outbreak, zinc exports will be affected. China's local zinc mines are on the verge of resuming production, but not yet. The TC price of zinc concentrate has been at the low level since 2019. As of March 2, the middle price of processing fee is 3800 yuan/metal ton in the south, 4000 yuan/metal ton in the north, and the import TC price is 80 dollars/metal ton. It is expected that the price will not change this week, reflecting the fact that the mine end is too tight. According to the traditional 28-28 profit distribution, although the early rise in zinc prices drove the smelter's profit back to the positive, but under the current low processing cost operation, the smelter's profit is still small, and it is not possible to significantly increase output. Taking into account the large scale of maintenance and shutdown of mainstream refineries in February and the short production time, the zinc output in February is expected to be 405,000 tons, a month-on-month decline of 8%. The ore end is tight and the smelting end is not willing to expand output unconditionally, which has a certain supporting effect on the zinc price.

At the beginning of March, downstream production resumed in succession.Boosted by infrastructure construction, galvanized structural parts enterprises quickly resumed production. According to the weekly utilization rate of galvanized sheet of Mysteel130 steel mills, by the end of February, the utilization rate had quickly recovered to 79.32% from 56.39% before the holiday, and the capacity utilization rate had also recovered to 69.70%. However, at the same time, the total social inventory of galvanized sheet coils has also risen to a relatively high level since 2016, and the next stage will be the stage of market verification of consumption growth. The current galvanized profit is also in the higher position since 2017, on the one hand, reflecting optimistic expectations for future consumption, on the other hand, also reflects the short term, the possibility of lower production.

Combined with macro expectations of a global economic recovery, combined with Biden's continued lobbying for Republican infrastructure stimulus after the collapse of the $1.9 trillion economic stimulus plan, overall demand is still more optimistic, providing some support to zinc prices.Taking into account the large scale of maintenance and shutdown of mainstream refineries in February and the short production time, the zinc output in February is expected to be 405,000 tons, a month-on-month decline of 8%.The ore end is tight and the smelting end is not willing to expand output unconditionally, which has a certain supporting effect on the zinc price.

High inventory year on year

In terms of LME zinc stocks, exchange stocks of zinc are already at their highest level since 2018. As of February 26, the domestic spot inventory of zinc ingot totaled 229,000 tons, which has nearly risen to the highest position after the alleviation of the epidemic in April 2020.Bonded zone stocks recorded 53,000 tons, also at the highest level since April 2020, when the outbreak eased.Inventories at home and abroad are at sky-high levels.The overstocking degree of zinc ingot is indeed surprising. Compared with the pre-festive period, the total apparent inventory increased by more than 54.79%, which brought great resistance to zinc price upward.

In the short term, zinc ingot inventory high speed and large accumulation of zinc prices did form pressure, but the supply of tight ore end is still continuing, and smelting end is not willing to expand output and conditions, coupled with March usher in zinc consumption season, zinc prices in the short term deep down the possibility is very small.On the macro side, it will be difficult for zinc prices to fall significantly as the U.S. House of Representatives passed the Joe Biden fiscal stimulus plan over the weekend and the market will refocus on liquidity.In general, the zinc price will basically show strong oscillation trend.If the market smelting end of the extension of the maintenance scope of the news, you can try to do more, and need to guard against the post-holiday consumption growth falsification.