Last week, zinc prices surged and then fell back. On the macroeconomic front, the hawkish remarks in the US Fed's May meeting minutes suppressed market expectations for rate cuts, causing both SHFE and LME base metals prices to decline. Fundamentally, the logic of tight ore supply remains. Domestic and imported zinc concentrate TCs for June continued to decrease. With high prices for copper and minor metals, smelters snapped up high-grade ores, using by-product profits to offset the loss from lower TCs. In April, zinc concentrate imports were 287,500 mt in physical content, down 10.22% YoY to low levels. It is expected that the increase in zinc concentrate imports in May will be limited. Consequently, it is difficult to quickly alleviate the low raw material inventory levels at domestic smelters, and smelters’ production will remain low. On the consumption side, the implementation of the ultra-long-term trillion-yuan national bonds in 2024 and the total investment in power grid construction exceeding 500 billion yuan are expected to boost zinc demand. However, currently, die-casting zinc alloy production is inhibited by high zinc prices. Orders from galvanised pipe and steel tower sectors are moderate, but large factories are still competing with small factories due to insufficient orders. Orders from photovoltaics and transportation sectors remain poor, and rainy weather in south China also inhibits end-user production. Overall consumption is weak.
The model predicts that the price range for SMM average #0 zinc ingot price will be [23,565, 25,090], with an average of 24,390. The unit is yuan/mt. The extreme price range is [22,970, 25,680], the normal price range is [23,370, 25,290], and the conservative price range is [23,760, 24,890]. Prices will consolidate at highs this week. The support range is [23,370, 23,760], and the resistance range is [24,890, 25,290].
Overall, due to the delay in rate cuts and the easing of copper short squeeze, the momentum for zinc prices to continue rising is insufficient. However, the logic of tight ore supply and consumption expectations will limit the downside room for zinc prices. The SHFE 2407 zinc contract price is expected to be between 23,500 and 25,000 yuan/mt; LME zinc: $2,900-$3,150/mt; discounts over the SHFE 2406 zinc contract: 120-70 yuan/mt.
