SHANGHAI, May 22 (SMM) - SMM interviews some industry insiders about their takes on the outlook for zinc prices for 2017 and 2018.
“The lead and zinc market may improve in 2017 compared to 2016, but precious metals market will see little recovery,” said Zhang Liangliang, Vice-General Manager of Inner Mongolia Yindu Mining Industry Co.
The zinc market is promising given current economic situations in China and abroad. Enthusiasm toward real economy is not strong after Trump became US new president, driving a large amount of hot money into the metal market. Capacity structure adjustment in China will also boost zinc demand. Zinc prices will stay high in the first half of 2017, but will fall in the latter half of the year. The average price for the year will be around 19,000 yuan per tonne.
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Yang Xiao, General Manager of Hechi Nanfang Non-Ferrous Metals Smelting Co. said ATK data show zinc metal supply increased 1.1% on a yearly basis during the first four months of 2017, with spot premiums and low inventories. Zinc supply and demand is generally balanced. Raw material supply will not be a major factor constraining zinc output. The driving factors restricting zinc output growth include cash tightness which is a result of change of macroeconomic policy, low profit at zinc smelters and environmental protection requirements. If prices fall sharply, zinc smelters may slash output. To sum up, raw material supply will gradually ease in 2017. Zinc supply will be steady as a whole. Concerns over supply shortages will remain. And zinc prices will fluctuate in a wide range.
Ren Xun, General Manager of Shaanxi Dongling Industry & Trade Group reckoned zinc supply and demand will be balanced in 2017. Prices will consolidate at highs given fundamentals and macroeconomic front.
One large lead-zinc traders from East China said fundamentals did not change.
“Some persons pointed out zinc ore shortages will alleviate in 2017, but we did not see any data showed that output grew. TCs are a direct reflection of global zinc concentrate shortages.”
“I think zinc prices will hover in a wide range and edge up in 2017, but will also hinge on global economic environment. If US enters deflation, commodity prices will be affected by liquidity front.”
Wang Kejiang, Purchasing Manager of Shandong Qixing Iron Tower Co. said world’s economic situation did not see essential change. The manufacturing remains sluggish. Many world’s top 500 companies still lay off workers in the face of current economic situation.
“As a leading iron tower producer in China, we feel soft downstream demand. Orders in domestic iron tower industry peaked last year but decreased noticeably in 2017. We don’t see a fundamental improvement in the next 1-2 years.” he said.
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Prices for nonferrous metals including lead and zinc posted big gains from late 2015. This bought high profit at zinc concentrate producers, which stepped up production. Although domestic zinc concentrate supplies are limited due to environmental protection inspections, such inspections also affected other upstream and downstream producers of the zinc industry chain. Overseas zinc mines restarted production and increased supplies given high profit, turning domestic zinc smelters to imported zinc concentrate.
On international situation side, there are a string of negative factors, including Fed’s rate hike in March, Brexit, French presidential election and major central banks’ interest rate decision. Global political situation is in tension. US new policy enforcement was blocked. When combined with Terminal High Altitude Area Defense (THAAD) issue, base metals prices face great downward pressure. As to fundamentals, zinc prices face key resistance level. Market bearishness dominates the market, both will weigh on zinc. Zinc ingot prices will inch down in the following year, and should move between 23,000-16,000 yuan per tonne.
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