China's domestic zinc prices fluctuated and rose in November. As of November 30, Shanghai Futures Exchange's main zinc contract price increased by 5.35% from Yuan 22,610/tonne to Yuan 23,820/t.
There're several main reasons for this zinc prices increase. The People's Bank of China announced to cut its bank reserve requirement ratio and release Yuan 500 billion and other supporting policies for real estate continued to promulgate, benefiting the nonferrous industry. Besides, zinc ingots' supply was short on limited transportation affected by the epidemic, supporting the increase of zinc prices.
Most zinc oxide enterprises had been affected, and the supply and orders both decreased and were not as expected, according to Mysteel's survey. Moreover, they faced financial pressure caused by high premiums with zinc ingot spot tight supply.
To ease the tight supply of zinc ingot and reduce costs, zinc oxide enterprises tried to increase the procurement of zinc slag. However, the zinc slag supply was small with lower-than-expected operating rates of galvanized factories.
As for the demand side, many zinc oxide enterprises began to specially receive orders from the chemical industry such as phosphating solutions instead of traditional rubber and ceramics industries and the demand situation has improved currently.
Even so, zinc prices in China are expected to fluctuate and fall continuously and zinc oxide prices will change slightly accordingly in the short term, due to decreasing orders from downstream enterprises, declining operating rates and output, and high raw materials prices.
District |
Epidemic Impact |
Current Situation |
Outlook |
Shandong |
Decrease in output |
Orders had been held and could not be delivered on transportation limitations by the epidemic impact. |
The market will improve by the end of the year. |
Hebei |
Stop production |
Orders were stable, but with overstocked products in the plant. |
Zinc prices will rise on tight spot supply. |
Jiangsu |
None |
Orders were less than in October. |
The market will remain stable until the Spring Festival. |
Shanghai |
Have difficulty in transportation |
Orders were mainly from long contracts. |
High zinc prices are unfavorable downstream. |
Chongqing |
Stop production |
Few orders from the rubber industry, but many from the chemical industry. |
Need to explore new downstream customers because of a downturn in traditional industries. |
Data Source: Mysteel |
Written by Durand Du, duxiaoyu@mysteel.com
Edited by Paula Xu, xuzhongping@mysteel.com