SMM12, 28 March: in early 2018, domestic and foreign zinc prices hit their highest levels since August 2008, climbing to 27235 yuan per ton and US $3595.5 per ton, respectively. However, in the second half of the year, zinc processing fees at home and abroad are obviously upward, and the market is expected to strengthen the recovery of global zinc mine supply. At the same time, downstream demand continues to be weak, coupled with the continued heating up of trade disputes between China and the United States, under the strong pattern of the dollar index, pessimistic expectations of goods have significantly suppressed zinc prices, zinc prices bid farewell to the upward trend for two consecutive years and entered the downward channel. As of December 28, the day closed. LME three-month zinc has fallen 24 per cent in 2018 and the Shanghai zinc index has fallen about 20 per cent.
In addition, SMM interviewed a number of institutions about the price of zinc in 2019, as follows:
Jin Rui Futures / Zeng Tong: for 2019, there is a more obvious uncertainty in the supply of zinc prices, thus aggravating the volatility of zinc prices. From the point of view of the time node, according to the progress of supply release according to the time node when the environmental protection problem is resolved as scheduled, we find that the inventory will be exhausted as scheduled in the first quarter, and the inventory will be deep in the second quarter, and the contradiction between supply and demand will be further intensified in the second quarter. We expect high prices before the year and then low prices, accompanied by the intensification of fundamental contradictions, the high point of the year is expected to be around the second quarter, the core of London zinc 220 to 2900 / ton, Shanghai zinc main contract core operating area 19000 to 24000 yuan / ton. It is important to emphasize that the marginal change as a result of the low level of existing inventories will amplify the reaction of the market, especially in a period of time when fundamental contradictions are prone to intensify.
German futures: in the medium to long term, the future global zinc concentrate production has basically increased year by year has become a fixed number, the contradiction between supply and demand is gradually alleviated. The recovery of smelter operation rate and the inflow of overseas zinc ingots, coupled with the drag of downstream consumption under multiple pressures such as macroeconomic and environmental protection, make it difficult for domestic dominant inventories to remain low. According to the seasonal law, after the Spring Festival is usually the time of inventory accumulation, once there are obvious signs of inventory accumulation, or will become an important node in the layout of long-term empty orders.
Overall, internal and external zinc prices have gradually entered the downward channel. However, due to the high probability that domestic smelting will continue to be disturbed by environmental protection and other problems, the space that can be improved in the short-term smelting link is relatively limited, so the conversion of zinc concentrate to zinc ingots may still not be smooth in the coming year. As a result, there may not be an obvious surplus of zinc ingots. Therefore, in the case of inventory accumulation rate is not so obvious, the rhythm of the layout of empty orders may be more difficult to grasp.
Strategically, we still advise investors to operate on the main train of thought after the price recovery and rebound. It is estimated that the core operating area of zinc in 2019 will be $2200 to $2600 / ton, and the core operating area of the main contract of zinc in Shanghai will be $18000 to 23000 yuan / ton. The arbitrage side can still pay attention to the positive operation of buying close and throwing away. In terms of cross-market arbitrage, it is a high probability event that the decline of the price of zinc in Shanghai in 2019 is greater than that in Shanghai. It is suggested that attention should be paid to the cross-market anti-arbitrage operation in Shanghai. At the same time, continue to pay attention to inventory and production changes and the trend of the RMB exchange rate, once the RMB stopped falling or stabilized, the decline in zinc prices in the domestic market is expected to accelerate. On the contrary, if the renminbi continues to depreciate, domestic commodity prices will still be strongly supported. On the other hand, we also need to pay attention to the actual processing fees after the 28 sharing mechanism of the smelter. If the actual processing fee is maintained at more than 5500 yuan / ton, the profits of the smelter will be considerable, and the smelting bottleneck at this stage may be quickly broken. Beware of the risk of a sharp fall in zinc prices at the same time suggest smelters to do a good job in profit preservation operation.
Guangzhou Futures / Li Jun: the increase in the supply of refined zinc abroad is still the main factor in shorting the price of zinc. From the point of view of demand, the demand for zinc abroad remains stable, while the domestic car market may further cool. Although the real estate market and infrastructure may be stimulated by policy, but the growth is also relatively limited, overall, next year's demand performance in the lower reaches of the zinc market is likely to be lower than this year. In addition, the instability of the international macro situation will also have a negative impact on zinc prices. The concussion of zinc is expected to be weak next year, with an operating range of $2400 to $2700. As far as China is concerned, due to the existence of environmental protection policy, the process of conversion of zinc concentrate to zinc ingots is still not smooth, and low inventory may also form a certain support for zinc prices. It is expected that the trend of zinc in Shanghai is also weak, with an operating range of 18000 to 22000 yuan / ton.
CIC Anxin / Xiao Jing: in 2019, zinc prices were mainly volatile and downward, and the core logic of the bear market is that the global zinc concentrate can achieve optimistic supply growth, and processing fees will show even triple-digit increases, and begin to transmit to the smelting end. Unlike 2018, upstream zinc supply is expected to meet expectations in 2019. For the whole year, the balance between supply and demand of zinc concentrate and refined zinc shifted to surplus. At the same time, the pace of price decline was mainly related to the replenishment rate of low zinc ingots in the first quarter and the macro performance of mainstream economies in the second quarter. Zinc prices are expected to continue the bear market, the outer plate of zinc will fluctuate to US $2000, while Shanghai zinc decline target at 18000 yuan / ton. Because China is more dependent on imported zinc concentrate, the opening of import profit ratio will often occur, and there will be more arbitrage opportunities. At the end of domestic replenishment, the arrangement of Shanghai zinc price difference will also reverse the Back structure and provide better arbitrage opportunities.
South China Futures: for the 2019 zinc market, we believe that the center of gravity of zinc prices is at risk of further downward movement. At present, the global zinc market is still in a state of gap, because the increment of zinc ore is relatively slow and it takes some time to transmit to zinc ingots, so the gap is difficult to make up for in the short term, at least in the first quarter of 2019, it is difficult to produce zinc ingots quickly to meet the demand. However, relatively speaking, the supply of foreign zinc ore raw materials is relatively sufficient, and the capacity utilization rate of smelting link is higher, therefore, it is expected that the zinc ingot storage will start from abroad. It is expected that the internal and external weakness of zinc prices will also be maintained in 2019. Due to the constraints of environmental protection in China, the supply of zinc is relatively tight, but with the renovation of production and the upgrading of equipment, the restrictive factors of environmental protection may gradually fade, the superimposed processing fees will continue to rise, and the smelting profits will be repaired. Or it will stimulate refineries to increase production more quickly to increase supply and fill the gap in zinc ingots. The accumulation of zinc ingots depends on the time and speed of zinc ore conversion to zinc ingots. Once the inflection point appears, the balance between supply and demand of zinc ingots will be reversed and turned into surplus. Therefore, 2019 is the key year for the balance of supply and demand of zinc from gap to surplus, which is expected to appear in the second half of 2019, and the surplus will continue until 2020. Superimposed on the expectations of the domestic economic downturn and weak demand, the main operational strategy in 2019 is to sell short every high in 2019.
Fitch: fundamentals are tight zinc prices will rebound in 2019: Fitch Solutions said that in the coming months, boosted by China's infrastructure spending, the worst performing basic metal zinc in 2018 will recover in the coming months. Fitch said last year's decline was mainly driven by market sentiment and that fundamentals were "still nervous as a whole". Fitch said the average price of zinc would be $3050 a tonne in 2019 and $3075 in 2020. The current price is $2467, compared with an average of 2892 in 2018. Note: the price of LME zinc fell 26 per cent in 2018.
The point of view is being updated.
SMM "2018 China Zinc Industry chain Research report" will be released soon, including the latest views and data of the SMM Zinc Research Group. If you have any requirements, please contact Wu Tingting: 13795448891. You are also welcome to visit the SMM website to pay attention to the free news and price services provided by the Zinc Research Group.
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