SHANGHAI, Apr. 15 (SMM) – Average operating rate at domestic zinc oxide producers in March jumped to 58% due to consumption recovery, according to Shanghai Metals Market survey.
The enterprises surveyed are mainly located in Jiangsu, Shandong, Hebei, Shanghai and Liaoning.
Operating rates at zinc oxide producers rose in March due to demand improvement after the Chinese New Year holiday. Production, however, at zinc oxide producers using zinc slag as raw material was weak as strong galvanizing prices bit into their profits. Besides, operating rates at zinc oxide producers in Hebei and Shandong were still restricted by environmental protection inspections.
The strong automobile market served as a major driving force behind higher production at zinc oxide producers in March.
According to China Association of Automobile Manufacturers (CAAM), automobile output and sales in March were strong. Automobile output in March was 2.20 million units, up 34.41% MoM, and 5.59% YoY. Automobile sales were 2.17 million units, up 35.84% MoM, and 6.58% YoY. In April, the three-day Chinese Qingming Festival and no sales promotion efforts during the first month of 2Q will reduce automobile production and sales. But, rumors of automobile purchase restriction in more than 10 cities will continue to support the automobile market in the short term.
April is a high demand month for zinc, and orders should improve from the pharmaceutical, ceramic, electronics and chemical sectors compared with March. This, combined with stock-building in preparation for summer maintenance, would help average operating rate at zinc oxide producers rise above 60%.
The SMM survey also found that 60% zinc oxide enterprises were optimistic toward zinc prices in April. Hence, some of them raised zinc inventories during late March-early April. Inventories grew 11.1 days recently, up from 7 days of production in mid-March, according to SMM survey.