Galvanizing Industry's Operating Rate Declined MoM in Sep

SHANGHAI, Oct 12(SMM) --The operating rate of domestic galvanizing industry was still low in September and was on the down track compared to in August. SMM surveyed on the production in September of 23 major domestic galvanizing enterprises, most of which are located in North China and East China and are involved in galvanized pipe, structure and iron tower. Most of the above enterprises were conducting production normally except for those negatively affected by maintenance conduction and electricity restriction. But the operating rate of galvanizing industry is still low, with the average operating rate of the enterprises surveyed of 78.8%, lower than 80.2% in July. SMM believes the reasons resulting in the above situation are firstly the high zinc prices as most downstream buyers considered RMB 18,000/mt as an emotional benchmark; secondly the weak demand from terminal consumers. According to the enterprises surveyed, the orders from terminal consumers are limited, and they are inevitably influenced. In addition, according to some galvanizing plants and galvanized steel pipe manufacturers, steel pipe prices declined recently, dragging down galvanized pipe. As a result, these enterprises are unwilling to conduct production due to the reduced profit.

According to SMM sources, Jiangsu and Zhejiang provinces are both conducting energy efficiency and power restriction policies, but the influence at present is limited on galvanizing industry. On one hand, enterprises like iron tower manufacturers and iron tower plants are electricity-based or tenders invited, so their electricity won’t be restricted. Meanwhile, other large-scale enterprises are not refrained of power either; on the other hand, enterprises may conduct production on 5-day shift or flexibly on an as-needed basis even if they are restricted. Generally speaking, the influence is limited by far. Some enterprises indicate that the power would not be cut till October even if their electricity consumption exceeds the determined maximum in September. So the influence will also be limited.

Downstream enterprises which account for 52% of  the enterprises surveyed take an neutral attitude toward zinc price trends, believing zinc prices will remain around RMB 18,000/mt. They also consider high prices unacceptable. While 26% of the enterprises take a pessimistic attitude on the market fundamental, believing prices will drop when the supply is in surplus, and the optimistic market players see zinc prices up to RMB 20,000/mt by the year-end in consider of the favorable macro economy. 
 

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