[SMM analysis] widening zinc price difference between Shanghai and Guangdong, there is still room for expansion.

SMM4, March 16: since March, the price gap between Shanghai and Guangdong has expanded one after another, this week the price gap between the two places has expanded to about 140 yuan / ton, the current price spread has covered the shipping charges of the two places, whether the subsequent price gap between the two places will continue to expand, whether there are profit opportunities to ship to Shanghai, is the focus of market attention.

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From the current situation of the price gap between the two places, the expansion of the price spread is in line with our previous expectations. The highest zinc ingot inventory in Guangdong exceeded 100000 tons after the festival. Although the market began to go to the warehouse in the later stage, there are still about 90, 000 tons of inventory in recent years. We believe that it is still difficult to digest the surplus by relying solely on downstream consumption. In April, the Guangdong market was relatively special compared with previous years, mainly affected by the decline in terminal export orders. The terminal consumption of zinc alloy is inseparable from the export, while the consumption of Guangdong alloy accounts for more than 60%. The current overseas epidemic situation, especially in Europe and the United States, is more serious, affecting terminal demand, we expect die-casting zinc alloy demand will decline, which will also affect the speed of storage removal in Guangdong market, the subsequent inventory still needs to be transferred to East China to digest some of the excess.

In comparison, East China is a composite market, downstream including die-casting zinc alloy, zinc oxide, zinc plating and so on. Although the demand for die-casting alloy has dropped, the consumption of zinc plating is better, and the zinc oxide plant has also been started. In the case of this decline and decline, the overall demand performance is better, driving the market transaction, at the same time, the trade atmosphere in the East China market is relatively good, the market participates in a large number of companies, the transaction volume is large, and can also boost the transaction price. To sum up, we think that there is still room for widening the price gap between the two places.

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