SMM, September 9:
According to SMM data, the operating rate of domestic zinc oxide enterprises in August was 45.07%, up slightly by 0.12 percentage points MoM but down 2.65 percentage points YoY. The industry's overall operating level recovered modestly but remained weaker than the same period in previous years. From the perspective of end-use consumption structure, demand across downstream sectors was clearly differentiated, with the overall pattern showing off-season weakness and insufficient growth.
From the perspective of end-user orders,
the tyre sector
as the main consumption area for zinc oxide, showed certain off-season characteristics in domestic demand in August. Some tyre factories reported that enterprises in the industry still held certain inventory. Meanwhile, according to data from the China Automobile Dealers Association, the vehicle inventory alert index for domestic automobile dealers in August was 62.3%, up 5.3 percentage points YoY and up 1.2 percentage points MoM. The inventory alert index stood above the 50 mark, indicating that vehicle inventory pressure in the market was also significant. As a result, downstream sales were sluggish, and some tyre enterprises experienced production cuts or suspensions. As time progressed, on the cost side, zinc prices continued to climb in August. Zinc oxide enterprises raised their quotes under cost pressure, but market demand showed no obvious improvement. Tyre factories still purchased mainly for essential restocking, providing limited support for zinc oxide consumption and to some extent constraining the rise in zinc oxide product prices.
Meanwhile, uncertainty on the export front intensified. The Eurasian Economic Union (Russia, Kazakhstan, Belarus, etc.) disclosed the final ruling of the sunset review on load-bearing (all-steel) tyres. On August 19, the Eurasian Economic Commission issued the final ruling disclosure, recommending that the original anti-dumping duties be maintained for five years. In addition, according to information published on the official website of the Canada Border Services Agency on August 31, Canada initiated anti-dumping and countervailing duty investigations against Chinese truck and bus tyres, and the CBSA will issue a preliminary ruling within 90 days.
Ceramic sector and feed-grade zinc oxide sector
The ceramic industry has been constrained by the sluggish real estate market, with weak market demand in recent years. Summer rainfall has also kept the zinc oxide industry in its traditional off-season phase, with supporting demand remaining weak and limited order growth. Demand performance in August was mediocre, with zinc oxide purchases maintained at essential levels. As for feed-grade zinc oxide, demand remained subdued in H1 this year due to pressure from hog prices. In August, hog prices recovered but with limited gains. Breeding enterprises showed low willingness to expand herds, and market feedback indicated that some farming enterprises culled piglets ahead of schedule, leading to weak demand for feed-grade zinc oxide. However, the Mid-Autumn Festival and National Day will arrive at the end of September. Based on patterns in previous years, some pre-holiday stockpiling is expected to drive an improvement in feed-grade zinc oxide demand.
Electronic-grade zinc oxide sector
Electronic-grade zinc oxide is a relatively stable consumption segment. Supported by power grid investment, related end-user orders remain steady, providing some support for production at certain enterprises. However, due to the limited overall market size, its boost to total industry demand is relatively limited.
Looking ahead to September, the operating rate of zinc oxide enterprises is expected to rise to around 47.96%, up 2.89 percentage points MoM. On one hand, some enterprises that resumed production in late August are expected to return to normal production in September; on the other hand, some previously suspended enterprises plan to start operations in September and are currently in the equipment commissioning stage. In addition, September is a traditional peak consumption season, and downstream end-use demand is expected to gradually recover, which will provide some support for end-use consumption.
(The above information is based on market collection and comprehensive assessment by the SMM research team. The information provided is for reference only. This article does not constitute direct advice for investment research decisions. Clients should make decisions prudently and should not use this as a substitute for their own independent judgment. Any decisions made by clients are not related to SMM.)
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