Secondary Zinc Oxide in June: Insufficient Production, Prices Hard to Drop [SMM Analysis]

In June, secondary zinc oxide prices continued to rise. How will they perform going forward?

Production side, affected by tight raw material supply and invoice issues, secondary zinc oxide plants saw restricted operations. Enterprises’ production schedules remained largely normal, but low raw material liquidity and narrowing profit margins led to production cuts or shutdowns at some factories, dragging down overall output.

Price side, secondary zinc oxide prices edged higher at high levels in June, driven by three main factors:

1. Cost side, rigid increase: Coal prices continued to rise, directly driving up energy costs in the roasting process. Meanwhile, steel mill operating rates were moderate, raw materials like steel ash were tight, and procurement costs stayed high, providing solid cost support for enterprises.

2. Passing on of invoice costs: Invoice issues led to higher raw material costs, and secondary zinc oxide enterprises passed these on to the finished product through coefficient adjustments, raising the central quotation.

3. Passive supply-side tightening: Under dual constraints from raw materials and invoices, some small and medium-sized producers cut production or halted operations, resulting in tight circulating market supply. Sellers’ bargaining power strengthened, further supporting prices.

However, the upside room for price increases remained constrained by resistance from downstream enterprises. Currently, secondary zinc oxide prices are at historically high levels. Downstream enterprises, facing financial pressure and weak finished product orders, showed limited willingness to accept high-priced raw materials. Procurement was mainly need-based, with a notable inclination to push for lower prices. The tug-of-war between sellers and buyers intensified, and the market displayed a stalemate pattern of “cost-driven price increases and demand-driven price suppression.”

Outlook: Tight raw material supply is unlikely to ease in the short term, and invoice-related restrictions on raw material circulation will persist. Combined with low profit margins, secondary zinc oxide plant operating rates are expected to remain constrained. H2 production is likely to be weaker than the same period last year. Price side, cost support remains solid, and enterprises have a strong willingness to raise prices. However, weak downstream demand makes it difficult to absorb excessively high raw material prices. Secondary zinc oxide prices are expected to hover at highs in H2, with limited overall gains.