China's zinc prices fluctuated significantly in 2022. The average price of zinc ingots increased by about 12% year on year, while the apparent consumption of zinc ingots decreased by about 7.7% year on year, according to Mysteel. And the inventory of zinc ingots at present is so low even with a loose supply of concentrates.
Looking forward to 2023, global zinc consumption is likely to decrease, prices probably to fall, and ingot inventory to increase periodically. Because the overseas economy is likely to decline further with the global impact of the continued interest rate hikes by the Federal Reserve and other countries even though the demand in China is expected to recover gradually and the economic growth rate is better than in 2022.
Mysteel did an analysis of China's zinc market from zinc concentrate and ingots inventory.
Zinc Concentrate Inventory
China's zinc concentrate port inventory was 294,000 tonnes on December 2 with a continuous increase since August, and it was the highest point during 2020-2022, according to Mysteel. Mainly because overseas redundant zinc concentrates were sold to China under the impact of energy shortage with the shutdown of and decreasing demand for overseas smelters. Import of zinc concentrate increased by 23.93% year on year and 0.87% month on month to 393,600 tonnes in October, meanwhile, the cumulative import increased by 7.57% year on year to 3.2704 million tonnes from January to October, according to General Customs Administration(GAC).
Data Source: Mysteel
Inventory days of zinc concentrate in China's zinc smelters were 39 days which was also at a historically high level in 2019-2022, according to Mystseel's latest data. Similarly, this increase also began in August. Affected by this, treatment charges (TCs) of China's domestic and imported zinc concentrate rose accordingly to Yuan 5,000/mt and USD 280/dt and are expected to rise further in the future.
Data Source: Mysteel
It is expected that the loose supply of zinc concentrates and the high inventory in ports and smelters will last until the first quarter of 2023. While zinc concentrate inventory in China will decline if overseas smelters gradually resume production and increase the demand for zinc concentrate in the second quarter of 2023.
Zinc ingot inventory
Zinc ingot social inventory in China's main markets was 85.24% lower than the peak in the year and decreased by 65.66% year on year and 67.97% compared with 2022 to 41,000 tonnes in December 2022 which was at a historically low level, according to Mysteel. And this decline began in May.
Data Source: Mysteel
Even with the impact of the epidemic, power shortage, environmental protection, and other factors, the output of China's refined zinc was stable in 2022. The output in October increased by 2.69% year on year and 1.33% month on month to 503,900 tonnes, and the cumulative output from January to October also increased by 0.99% to 4.84 million tonnes, according to Mysteel.
While the import of refined zinc greatly reduced in 2022. The import of unwrought zinc decreased by 76.18% year on year 113,000 tonnes from January to October, according to GAC, since the overseas supply of refined zinc decreased with the impact of the energy crisis. London Metal Exchange (LME) zinc inventory has decreased since December. LME zinc inventory decreased since December 2021, and it decreased by 81% from the peak in December 2021 to 39,750 tonnes on December 6, 2022. So, the Shanghai Futures Exchange(SHFE)/LME ratio increased, which was not favorable to import.
Data Source: LME
The export of unwrought zinc surged by 1357.36% year on year to 80,400 tonnes from January to October, according to GAC. Meanwhile, zinc ingot inventory in smelters was also low. As of December 2, zinc ingots in-plant inventory of 53 zinc smelters in China was 50,400 tonnes and at a low level, according to Mysteel. In the second half of 2022, the spot supply of zinc ingots in the markets was tight, and the spot premium of zinc ingots increased. Therefore, the zinc ingot sales of the smelter were good, making the inventory not easy to accumulate.
Data Source: Mysteel
Overall, the zinc ingot inventory is expected to increase in the first and second quarters of 2023, since smelters will be in full production on a sufficient supply of zinc concentrate and the downstream consumption of zinc ingot will be weak because of the Chinese Spring Festival holidays and the adjustment of the epidemic prevention policy.
Please refer to Mysteel's upcoming Zinc Industry Chain Annual Report for more information.
Pre-Sale: 2022 non-ferrous metals annual report | Mysteel
Written by Durand Du, duxiaoyu@mysteel.com
Edited by Paula Xu, xuzhongping@mysteel.com
