How Should Zinc Consumption Be Viewed Against the Backdrop of Geopolitical Conflicts?

SMM News, April 2:

Q1 2026 has passed, and the overall recovery in post-holiday consumption was somewhat delayed. How will consumption perform going forward?

Real Estate: In 2026, real estate policies continued to provide support, including the financing “whitelist” for property developers, debt extensions, the removal of high-frequency regulation under the “three red lines,” the full relaxation of home purchase and mortgage restrictions, low down payment ratios / interest rates, housing provident fund reform, tax rebates for home upgrades, support for families with multiple children / first marriages, equal emphasis on renting and buying, revitalization of existing assets, affordable housing, and urban village redevelopment. It was expected that the pace of decline would narrow in H2, showing a pattern of hitting bottom in Q1, recovery in Q2, and a weak recovery in Q3 and Q4, with the overall market remaining in an “L-shaped” sideways pattern of hitting bottom and consolidating at lows. This will still weigh on zinc consumption, but the drag will ease.

Power Grid: During the 15th Five-Year Plan period, State Grid Corporation of China is expected to invest 4 trillion yuan (more than 800 billion yuan annually on average), up 40% from the 14th Five-Year Plan period; in 2026, UHV investment is expected to reach 120 billion yuan, with 15 UHV DC projects to be commissioned and 4 DC plus 3 AC projects to break ground. From January to February, combined fixed-asset investment by State Grid Corporation of China and China Southern Power Grid totaled about 92-94 billion yuan, up about 70% YoY, indicating a strong overall start to the year.

Wind Power: Against the backdrop of global carbon neutrality, fiscal subsidies, and energy security, global wind power installations were expected to rise YoY to 159 GW in 2026, up 7.4%. The increase was mainly driven by global offshore wind power and onshore wind power in China, and was expected to provide a structural, high-growth boost to zinc consumption.

PV: China’s new PV installations hit a record high of 316 GW in 2025, with a YoY growth rate of 14.4%, of which utility-scale accounted for a high 51.7%. It was estimated that zinc consumption in the PV sector rose 7.4% YoY in 2025. Due to the cancellation of export tax rebates and supply exiting the market amid the push for industry “anti-involution,” new PV installations were expected to decline to 180 GW in 2026, down 42.9% YoY, and zinc consumption in the PV sector was estimated to fall 22.72% YoY in 2026.

White Home Appliances: Supported by China’s consumer subsidies and trade-in policies in 2025, the white home appliance sector as a whole maintained positive growth. Among them, washing machines performed the best, with cumulative growth up 4.8% YoY during the year, while refrigerators were up 1.6% YoY and air conditioners rose by less than 1% YoY. Affected by subsidy rollbacks, demand being brought forward, and the weak real estate market in 2026, the white home appliance sector is expected to show mild growth overall, structural divergence, a stable share but limited marginal contribution, with a rebound likely in 2027.

Automobiles: As of the end of 2025, China’s cumulative automobile production and sales were up about 10% YoY, with NEVs delivering particularly strong performance, and sales accounting for 47.8% of total automobile sales; in 2026, policy support (purchase tax) + trade-in + intelligent upgrades will support growth in automobile consumption, but the intensity of policy support will decline YoY, and export growth will slow down, so China’s cumulative auto sales YoY growth rate is expected to fall to 3.7%, while the share of NEV sales will further rise to above 52%, and is expected to increase to 68.8% by 2030. However, zinc consumption is mainly used in traditional internal combustion engine vehicles. NEVs emphasize lightweighting, and some components are being replaced by lighter aluminum alloys, aluminum-magnesium alloys, and other materials. In addition, judging from the overall dealer inventory coefficient, inventory remains relatively high, and under high inventory levels, growth in zinc alloy consumption in automobiles is expected to be constrained.

Overall, there were no obvious highlights in zinc consumption during the year. However, as 2026 marked the opening year of the 15th Five-Year Plan, the overall national fiscal stance was expected to be proactive fiscal policy + ultra-long special treasury bonds + special-purpose bonds. Total infrastructure investment for the year was expected to exceed 7 trillion yuan, with a focus on advancing water networks, power grids, computing networks, communication networks, underground pipeline networks, logistics networks, and integrated multi-dimensional transportation. Infrastructure investment was expected to maintain steady growth.

Meanwhile, on the export side, intensified geopolitical conflicts disrupted logistics in the short term and drove costs sharply higher, weighing on galvanized sheet exports. However, Q2 coincided with the peak consumption season in Southeast Asia, Europe, the US, and other regions, which was expected to offset part of the decline. In addition, geopolitical conflicts led to shifts in trade flows, and the strong US dollar logic was favorable to China commodity exports, raising the possibility of order replenishment in Q3 and Q4. Moreover, although the stricter inspection of “forging or purchasing customs clearance documents from other import and export firms” implemented in January, as well as anti-dumping measures and trade barriers in countries such as Vietnam (additional tariffs of 12%-15%) and Colombia (anti-dumping investigation launched in February), increased export costs, some orders shifted to other Southeast Asian countries, the Middle East (non-conflict areas), and other Latin American markets. Overall, the impact was relatively limited, and galvanized sheet exports were still expected to maintain positive growth for the full year.

Data Source Statement: Except for publicly available information, all other data is processed and derived by SMM based on publicly available information, market communication, and SMM’s internal database models, and is for reference only and does not constitute decision-making advice.