SHANGHAI, Jun. 20 (SMM) – Average operating rate at Chinese zinc oxide producers is expected to fall further in June from 60.1% in May as a low-demand season sets in, Shanghai Metals Market foresees.
In May, the average operating rate at domestic zinc oxide producers dropped to 60.1% from April’s 60.8%, according to SMM survey of producers mainly Jiangsu, Shandong, Hebei, Shanghai and Liaoning. The decline was due mainly to tight liquidity and firm prices of zinc slag from environment protection inspections, especially in north China.
In June, production at those producers is expected to fall further, SMM survey
The arrival of off-season for the automobile market will reduce zinc oxide demand in June. According to the China Association of Automobile Manufacturers (CAAM), China’s automobile output and sales during May totaled 1.98 and 1.91 million units, respectively, down 4.4% and 4.6% MoM. Tight liquidity and rising financing costs will further compound a downward pressure on zinc oxide consumption in the automobile market.
SMM also expects weak performance in other sectors to drag down demand for zinc oxide, including poor orders in the electronics sector in its high demand period during April-June, and soft demand for ceramic and chemical engineering in summer months.
The SMM survey also finds that domestic zinc oxide producers reduced raw material inventories due to high zinc prices and poor orders, with June average inventories down to 7.3 days of production, according to preliminary data.