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Zinc to Bounce Up as China Output Cuts Show Result, SMM Says
Mar 21,2017 10:54CST
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Source:SMM
Zinc prices fell below 22,000 yuan per tonne March 9 due to concerns over failure in output cut by zinc smelters. Fortunately, a large number of Chinese zinc smelters began maintenance.

SHANGHAI, Mar. 21 (SMM) - Zinc prices fell below 22,000 yuan per tonne March 9 due to concerns over failure in output cut by zinc smelters. Fortunately, a large number of Chinese zinc smelters began maintenance.

In addition to maintenance cycle, recent output cut is also the spirit of the meeting of some large zinc smelters in Central West China held recently.

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But the focus is whether the maintenance will actually help reduce refined zinc supply.

China’s refined zinc output is expected to be about 1.29 million tonnes in the first quarter of the year, up 1.4% year-on-year, SMM predicts. SMM undertook a survey of maintenance at zinc smelters during March and April, and found some smelters delayed maintenance to April. Zinc output in March is estimated to be 430,000 tonnes, while output in April should fall 1.9% on the month and down 3.9% year-on-year.

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Jan.-Mar.

Year-on-Year

Mar. (estimated)

Apr. (estimated)

Refined zinc output  (10,000 tonnes)

128.8

1.4

43

42.2

 

Among downstream industries, demand from die-cast zinc alloy and zinc oxide picked up rapidly. Orders from zipper, bathroom accessory and electronic accessories also increased. According to producers’ production plan, operating rate at die-cast zinc alloy producers is expected to be 62.5% in March, up 19 percentage points month-on-month because of the Chinese New Year holiday, and up 0.08percentage point year-on-year. Orders from zinc oxide, tire and electronics industries reported noticeably growth. Operating rate at zinc oxide plants will rise to 61%.

Production at galvanizers in Hebei’s Baoding and Langfang was restricted in March because of environmental protection, but most of them restarted after March 16, SMM said.

Demand for galvanized tube/pipe was weaker than the same period of last year, so producers did not reach full operation. Galvanized steel tower producers have yet to receive orders from the State Grid, and mainly execute previous orders. Regional orders were relatively brisk. Auto plate orders were high, and output of home appliance products was steady. End-user demand will not pick up until late March because of environmental protection, SMM added.

Trading inventories tracked by SMM recorded big fall for two weeks in a row. This is because of fewer arriving shipments from zinc smelters after maintenance and steady recovery in downstream demand, SMM said.

Collectively, zinc prices will have impetus to rebound in the near term given shrinking zinc supply. At the same time, zinc futures on the SHFE see backwardation structure now. Positions on SHFE zinc hit a 3-month high with a large inflow of capital. So zinc prices will find a boost.

For news cooperation, please contact us by email: sallyzhang@smm.cn or service.en@smm.cn. 

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