Metals News
Limited capacity expansion, environmental restrictions to weigh on Q1 zinc supply
smm insight
Feb 1,2019

SHANGHAI, Feb 1 (SMM) – Despite greater supplies of zinc concentrate, supplies of refined zinc across China in the first quarter of 2019 are unlikely to grow to levels seen in previous years given limited capacity expansion, environmental restrictions and facility relocation.

Expectations of zinc concentrate output growth, which would boost zinc supplies, pressured zinc prices in 2018. However, stocks across LME-registered warehouses and social warehouses across Shanghai, Guangdong and Tianjin stayed at lows as of the first month of 2019.

Widely anticipated demand growth from infrastructure projects and downstream consumption recovery after the Chinese New Year holiday further lowered the possibility of a supply surplus.

Given the relatively high zinc prices and uncertainties about orders, zinc downstream consumers failed to make large purchases ahead of the CNY break. This might result in a flurry of purchases after CNY, which would temporarily tighten supplies of refined zinc and bolster prices of zinc at the end of the first quarter.

The most-traded zinc contract on the Shanghai Futures Exchange rebounded from earlier lows above the 21,000 yuan/mt level as of the end of Janaury.

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