Overview of Stock Replenishment in Zinc Downstream Industries Prior to Chinese New Year Holiday

SHANGHAI, Feb. 4 (SMM) -- Zinc prices stabilized technically during this week after dramatic declines over the past week (January 25-29th), with prices moving in the RMB 17,000-18,000/mt range, and downstream purchases for stock replenishment improved markedly as a result.

SMM sources report that zinc downstream orders were very limited over the past three months, especially for galvanizing industry, which accounts for more than 40% of total zinc downstream consumption. Orders in galvanizing industry decreased significantly due to weak conditions and steel prices, which directly affected overall zinc demand. A number of galvanized pipe and galvanized plate producers in north China reduced operating rates in early 2010, and also shut down for the Chinese New Year holiday in late January and early February ahead of schedule. In general, stock replenishment activity was not active in galvanizing industry. In addition, production in brass, zinc alloy, and zinc oxide industries experienced no marked changes, and only producers who plan to maintain normal production during the Chinese New Year holiday replenished stocks, while the remaining downstream producers purchased goods on an as-needed basis.  

In general, purchase sentiment for pre-holiday stocks in 2010 was high compared with 2008. Meanwhile, zinc prices soared supported by speculative funds since December 11th, and purchasing interest in both futures and spot zinc markets will be higher, once zinc prices experience significant reductions. However, whether or not domestic zinc prices can stabilize and move higher remains unknown in view of uncertain macro policies and wide fluctuations in LME zinc prices.

To contact the writer on this report: monicagao@smm.cn

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