SMM, April 29:
In May, SMM's monthly domestic zinc concentrate TCs rose by 50 yuan/mt MoM to 3,500 yuan/mt, while the monthly TCs for imported zinc ore increased by $5/dmt to $45/dmt. The current period coincides with the peak negotiation period for domestic zinc concentrate TCs in May. However, the negotiations between the two parties have reached a stalemate. Compared to the earlier months this year, the increase in domestic zinc concentrate TCs in May has slowed significantly. Some enterprises in the market believe that domestic TCs may have peaked. What is the actual situation? SMM conducted an analysis of the supply and demand dynamics of zinc concentrates:
Firstly, from the supply side of zinc concentrates. According to SMM, the first half of the year marks the conventional season for domestic mines to resume production. Based on seasonal patterns, domestic zinc concentrate production is expected to continue recovering MoM from March to May, with domestic zinc concentrate supply in May continuing to increase. Regarding imported ore, according to data from the General Administration of Customs of China, China's cumulative zinc concentrate imports from January to March reached 1.2178 million mt, up 36.62% YoY, basically maintaining the import level of the fourth quarter last year. With the continuous inflow of imported zinc ore ordered by smelters in the earlier period, the volume of imported zinc ore in April and May may remain stable.
Secondly, from the demand side. With the rapid rebound in domestic zinc concentrate TCs and the increase in sulphuric acid prices, some smelters began to achieve small profits from March onwards, significantly boosting their production enthusiasm. As a result, domestic refined zinc production increased significantly MoM in April. Entering May, although some enterprises plan to conduct maintenance, with the gradual commissioning of Yunnan Copper, Wanyang, and others, the overall demand for zinc concentrates in May may not decline significantly.
Additionally, from the perspective of miners' profits. Despite the rapid increase in domestic zinc concentrate TCs in the first quarter, domestic miners' production profits in March still remained at approximately 6,000 yuan/mt (metal content), maintaining a relatively high level. In April, zinc prices declined significantly MoM, leading to a decrease of approximately 1,000 yuan/mt (metal content) in the profits of domestic zinc concentrate enterprises. Due to the compression of profits, domestic miners have low willingness to raise zinc concentrate TCs in May.
Overall, although some smelters will conduct maintenance in May and smelters' sentiment to stand firm on quotes persists, considering profit factors, miners have a strong willingness to keep zinc concentrate TCs flat in May. Under continuous negotiations between the two parties, the increase in zinc concentrate TCs in May compared to April is expected to be limited. Looking ahead, despite the significant increase in overseas zinc concentrate output this year, there is no obvious increase in domestic zinc concentrate output except for Huoshaoyun. Moreover, with improved profits, smelters have high production enthusiasm, and new smelters commissioned in the second quarter in China are also gradually ramping up production. Under the dual increase in supply and demand, the potential for future increases in domestic zinc concentrate TCs may be limited, requiring continuous attention to the subsequent inflow of imported zinc ore.
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