Zinc prices fell near the smelters cost, and have risen since February 21 on the back of cost support from the mine and news of smelter maintenance and shutdowns and expectations for downstream production resumption after the Lantern Festival, as well as the fourth meeting of the Central Financial and Economic Commission last Friday, which pointed out that it is necessary to promote the update and technological transformation of various production equipment and service equipment, and encourage the replacement of old consumer goods such as automobiles and home appliances with new ones, etc. As of February 27, SHFE zinc reported an increase of 1.27% and closed at 20,670 yuan/ton, an increase of 545 yuan/ton from the previous low, an increase of 2.71%.
In terms of spot prices, the spot quotations of SMM 0# zinc ingots also rose on February 27. As of February 27, the spot quotations of SMM 0# zinc ingots rose to 20,590~~20,690 yuan/ton, with the average price quoted at 20,640 yuan/ton. Compared with February 19, it increased by 350 yuan/ton, an increase of 1.72%.
According to SMM research, in the first week after returning from the Chinese New Year holiday, zinc downstream companies started operations one after another. However, judging from the downstream operating rates situation last week, the overall performance was not as good as the same period in 2023, and failed to achieve a "good start" . Among them, except for steel towers, the performance of galvanizing companies in other sectors was deviated, and the company's overall response to order performance was relatively sluggish; the performance of die-casting and zinc oxide was weaker than that of galvanizing, and companies started work relatively late, basically after the Lantern Festival.
As mentioned above, as early as the fourth quarter of 2023, the weekly TCs for domestic zinc concentrates have been on a downward trend, mainly due to the fact that smelters began to enter the winter storage stage in October, resulting in strong demand for raw materials at the ore end; at that time As the SHFE/LME price ratio ran at a high level, the import window opened intermittently, and domestic ore supply was insufficient against the background of winter storage. Smelters actively snapped up imported ore, and the number of imported zero orders increased. Zinc concentrate imports in October reached a high of more than 430,000 tons.
In November and December, with the arrival of severe cold weather in the north, especially in Qinghai, Xinjiang and other places, the soil in some mines freezes in winter, making mining more difficult. At the same time, continued low temperatures also caused damage to mining personnel and machinery and equipment, rising mining costs, thereby affecting mineral production. Therefore, some minerals in the north reduced production and suspended production in winter. Due to the lower SHFE/LME zinc price ratio and the closing of the import window, the import volume dropped to 314,000 physical tons in November. Although the import volume of zinc concentrate increased compared with November, it is still difficult to improve the domestic ore shortage situation.
Entering 2024, smelters were actively reserving raw materials for production in the first quarter, resulting in greater demand for ore. At the same time, some mining companies would be on holiday for maintenance during the Chinese New Year. The overall domestic zinc concentrate supply was reduced, and TCs continued to decrease. According to SMM's previous research, after the domestic ore TC gradually dropped to 4,100 yuan/mt with metal content, for smelters, the current TC is no longer profitable, and the smelter's willingness to produce has declined.
But even so, according to SMM spot quotations, domestic Zn50 concentrate TC (monthly) dropped again by 100 yuan/mt with metal content in March to 3,800~4,200 yuan/mt with metal content, with an average price of 4,000 yuan/mt with metal content.
As for the reason for the further decline in monthly TCs, according to SMM research, some smelters have begun negotiations on March TCs since last week. Judging from the negotiation expectations, mines generally believe that the impact of the seasonal off-season has not ended yet, and currently, the northern mines are still in a state of suspension. Due to the impact of some mine maintenance during the Chinese New Year holiday, the overall production volume remains low. Therefore, smelters expect TCs to fall by around 100 yuan/mt with metal content.
However, it should be noted that under the current TC level, some smelters have already undergone maintenance and reduced production due to losses. If the TC is subsequently reduced again, it may lead to increasing smelter maintenance and production reductions. Due to the cost support of smelting plants and the subsequent replenishment of imported ore, there is insufficient willingness to reduce zinc concentrate TCs in March. As for the news currently circulating in the market that many smelters will undergo maintenance and production cuts, the actual situation still needs to wait for time to be verified.
Smelters were in normal production during the Chinese New Year, while downstream companies were basically on holiday. Therefore, the social inventory of zinc ingots after the holiday has entered the accumulation stage. As of February 26, the weekly social inventory of zinc ingots in seven regions in China increased to 170,100 tons.
Taken together, the current tightness of the mining industry and the accumulation of social inventories are still less than expected, which still supports zinc prices. With the strength of consumption recovery uncertain, zinc prices are expected to maintain a rangebound trend in the short term.
![Zinc de Tianjin: Los precios del zinc repuntan, la demanda downstream se mantiene cautelosa [Comentario de mediodía de SMM]](https://imgqn.smm.cn/usercenter/tAyyp20251217171754.jpg)
