2024 National Day Holiday Zinc Market Review and Post-Holiday Outlook [SMM Analysis]

SMM, October 8: Holiday Trend Review: During the domestic National Day holiday, LME zinc continued to rise, with the 5-day moving average consistently supporting its trend. After opening, LME zinc extended its previous gains, quickly rising to $3,209/mt, reaching a nearly nineteen-month high, then falling back from highs to early-week levels. On Friday, LME zinc rose again, recovering some losses. By Friday's close, LME zinc settled at $3,170.5/mt, up $95.5/mt for the week, a 3.11% increase. Last Friday, LME zinc inventory recorded 245,325 mt, down 6,100 mt from before the holiday, mainly from Singapore warehouses.

Before the holiday, China announced a series of favorable policies, including lowering the reserve requirement ratio, reducing the mortgage rate on existing home loans, and standardizing the minimum down payment ratio for mortgages. These measures stimulated market sentiment and strengthened consumption expectations, leading to a broad rise in non-ferrous metals, with LME zinc also moving up. However, as the market gradually digested these policy expectations, the upward momentum for LME zinc appeared insufficient, dropping back slightly. Meanwhile, the U.S. September non-farm payrolls increased by 254,000, far exceeding the market's general expectation of 150,000 and the previous value of 142,000. The strong labour market performance again boosted LME zinc prices.

Post-Holiday Outlook: Supply side, due to increased production at some northern smelters, SMM expects October smelter production to rise above 500,000 mt, with overall production recovering but still low. Additionally, domestic mines have been operating steadily recently, with no significant increase in ore production expected. Although there is an expectation of a rebound in TC, smelters' losses remain unchanged. Due to raw material constraints and the need to stockpile for winter, zinc ingot production in the fourth quarter may remain low.

Demand side, during the National Day holiday, favorable policies released by the state led to a rise in ferrous metals prices, increasing orders for galvanized pipes. Moreover, September and October are peak periods for tower and photovoltaic orders, leading to an overall improvement in consumption, though the overall improvement is limited. Overall, the weak supply side remains unchanged, and the demand side still needs further improvement. From a macro perspective, the series of stimulus policies in China have been largely digested by the market, and the transmission of policy effects still requires time. Zinc prices may need more stimulus to continue rising, with attention on subsequent downstream consumption performance and macroeconomic operations.