Zinc price: its upward momentum will be weakened by the adjustment of supply and demand structure

In August, 2011, the main force of Shanghai Zinc has been oscillating at a high level. From the fundamental point of view, the continuous recovery of domestic demand has provided a favorable boost to the zinc price, while from the supply side, although the processing fee of zinc concentrate is low, the import of zinc concentrate has formed a certain degree of supplement to the domestic zinc concentrate, increasing the supply of refined zinc.After the end of the "Gold nine silver ten" consumption season, the demand will gradually fall, while the supply will continue to increase, then the zinc fundamentals will be bearish, under downward pressure.

The performance of downstream demand can still boost zinc price

In terms of primary consumption, SMM research shows that in September, the operation rate of die-casting zinc alloy enterprises was 44.38%, with a month-on-month increase of 5.84% and a year-on-year decrease of 7.23%.On the whole, the operation rate of zinc alloy enterprises continued to increase in September compared with August, and there was still a big drop year-on-year.

In general, the "gold nine silver ten" consumption season is reflected, the demand performance of the lower reaches of the zinc market continues to pick up, but now is approaching the end of October, into November, is the consumption of the off-season, then the demand for zinc will weaken.

Refined zinc supply rose steadily bearish zinc prices

In September, the processing fee of Northern zinc concentrate was 5,370 yuan/ton, down 67.5 yuan/ton from the previous month.In 2019, the average processing fee of northern zinc concentrate will be 6,700 yuan/ton.The processing fee of Southern zinc concentrate is 5170 yuan/ton, down 67.5 yuan/ton from last month.The average processing fee of Zinc concentrate in South China in 2019 is 6,400 yuan/ton.The processing fee for imported zinc concentrate was 137 USD/ton, down 18 USD/ton from the previous month.The average processing fee for imported zinc concentrate in 2019 is $275 / ton.This month, the average cost of processing zinc concentrate imports was the second highest in five years.Although the processing fee of domestic zinc concentrate is low, the import of zinc concentrate in China has increased significantly. Customs data shows that in September, the import volume of zinc concentrate was 294,700 physical tons, up 18.14% from the previous month.From January to September, the cumulative import volume of zinc concentrate reached 2,258,700 physical tons, with a cumulative year-on-year increase of 2.03%.The import of zinc concentrate will supplement the supply of domestic zinc concentrate.

Although zinc concentrate processing fees are not high, but thanks to the price of zinc recovery, zinc smelters are still profitable.According to statistics, the profit of refined zinc smelter was 1,905.64 yuan/ton, up 19.46 yuan/ton from the previous month.The average profit of galvanizing plant in the same period in 2019 is 2997.21 yuan/ton.According to antaike's statistics on the output of 49 domestic smelters (involving 6.28 million tons of production capacity), the total output of zinc and zinc alloy of these enterprises was 3.839 million tons from January to September 2020, up 2.4% year-on-year.In September, the output was 471,000 tons, up 4.2% year-on-year, up 16,000 tons month-on-month, and the average daily output increased 7.7% month-on-month.Revised production for August 2020 was 452,000 tonnes, up 3.3 per cent year on year.In September, the smelting profit was relatively stable and the raw material supply could be guaranteed. Except for the two maintenance in Gansu, the preliminary maintenance was basically fully restored, with most smelters maintaining full production and some exceeding production.Inner Mongolia, Sichuan, Henan and Guangdong were the main sources of the increase.The increase in excess production mainly came from Hunan and Guangdong.Refined zinc supply is increasing, bearish zinc price.

Looking afternoon, in the past 10 months, consumption end of the season, demand will fall, zinc prices upward momentum is abate, and from the supply side, the current existing profit, refined zinc smelter production intend to fair, subsequent supply will increase, the zinc prices under pressure, from the perspective of supply and demand pattern, year-round supply of refined zinc excess supply will remain, technically, a remain resistance 20000 yuan/ton, Shanghai zinc main 1211 contract short-term is expected to once again close to the resistance, and then fell at the end of the year near 18500 yuan/ton.