Average Operating Rate at Zinc Oxide Producers Fall to 58% in October

SHANGHAI, Nov. 18 (SMM) - A recent SMM survey showed the average operating rate at zinc oxide producers during October was 58%. The enterprises surveyed are located in Jiangsu, Shandong, Hebei provinces, as well as Shanghai.

During October, some zinc oxide producers suspended production for three days due to the Chinese National Day holiday, but due to the East Asian Games in Tianjin, strict environmental inspections across Hebei and Shandong province limited output. Tight zinc slag supply also restricted production at SME zinc oxide producers, which dragged down overall operating rates in October.

Data from the China Association of Automobile Manufacturers (CAAM) show automobile output and sales in October were 1.92 million and 1.93 million units, respectively, down 0.6% and 0.2% from September levels, but up 20.7% and 20.3% YoY. Automobile output and sales during the period January to October were 17.85 million and 17.82 million units, respectively, also up 13.6% and 13.5% YoY, and with growth in both categories up 0.8% from a year ago. The automobile sector is expected to remain brisk for the remainder of the year, so strong tire orders should boost demand for zinc oxide.

The electronics sector did not improve in October, with the pharmaceutical, chemical, and ceramic sectors also sluggish. Ceramic orders contracted in November, but strong demand in the tire sector will support orders at zinc oxide producers. As galvanizers in Hebei and Shandong provinces restart production, tight zinc slag supply will improve, while operating rates at zinc oxide producers during November should stabilize.

The average #0 zinc price in October was RMB 15,089.44/mt, the third highest monthly average for the year, but which is also dampening buying interest from zinc oxide producers. These producers are keeping raw material stocks at around 6.5 days of production, down slightly on a monthly basis.