[market voice] tight supply, weak consumption, zinc prices or volatile operation before the festival

SMM1, April 24: the recent release of economic data shows that the global economic downward pressure is still large, colored narrow consolidation. Today's market data is light, fundamental zinc production continued to decline, supply tight support. However, near the Spring Festival holiday, downstream consumption is light, zinc prices are under pressure. The Shanghai Zinc main 1903 contract rallied and continued consolidation, trading at 21755 21410 yuan per ton within a day, hitting a new high since October 29, closing at 21480 yuan per ton, down 0.53 per cent from the closing price of the previous trading day.

With the Spring Festival approaching, how will the zinc price be interpreted?

SMM interviewed a number of organizations about the price of zinc before the Spring Festival, as follows:

Viewpoint 1: China's refined zinc (electrolytic zinc) production fell 2 per cent to 509000 tons in December 2018 from the previous month, down 1.7 per cent from a year earlier, according to data released by the National Bureau of Statistics on Wednesday. The total output for the whole of 2018 was 5.681 million tons, down 3.2 per cent from the same period last year. As the output continues to be lower than the same period last year, the relative shortage on the supply side continues to this day, the spot rising water of zinc ingots has formed a strong support to the zinc price. With the continuous reduction of LME zinc inventory, overseas spot is also likely to strengthen, the overall zinc price still remains strong shock.

Viewpoint 2: China continues to release positive signals, supporting infrastructure, stimulating the consumption of automotive household appliances, and so on, so that metal consumption has improved beyond expectations. Due to the influence of force majeure such as relocation and environmental protection, the output increment in the first quarter is limited. On the other hand, the inventory at home and abroad is low and faces the situation that the stock is not smooth. In view of this, we believe that zinc prices will continue to be strong in terms of absolute prices and the structure of monthly differentials in the first quarter.

Viewpoint 3: the recent zinc market shock adjustment, zinc price shock rose. The supply of the global zinc market has increased, from short supply to oversupply, which has a negative impact on the zinc market. The zinc market is in the off-season in winter, the demand is cold, the negative is greater than the good, the power to the zinc price rise is limited, the futures zinc price concussion rises, has the certain positive influence to the spot zinc price, but the overall positive power is insufficient.

Guotou Anxin / Xiao Jing: at present, according to the Spring Festival rest, the spot rising water has been obviously replenished, and the downstream terminals have begun to take leave one after another, and the further rise in spot prices is just a price without a market. There may be a small amount of replenishment in the country for some time to come. After reflecting the revised view of refined zinc output and off-season replenishment in the market, as well as reflecting the expectation of post-holiday consumption in advance, we think that there may be a small short-term reduction in zinc price before the holiday.

Guangzhou Futures / Li Jun: near the Spring Festival, downstream enterprises have a holiday one after another, the demand performance is general, and the spot discount also shows signs of weakening. As of January 24, the spot discount for SMM 0 # zinc was 170 yuan / ton, the lowest since December 7, 2018. However, the dominant inventory still maintains its historical position, with a stock of 2650 tons on January 24, which continues to be at a low level in the same period of nearly five years, and the low inventory has a certain support for Shanghai zinc. From the external point of view, the proportion of write-off warehouse receipts of external inventory has increased. As of January 23, the proportion of LME zinc inventory receipts reached 32.49%, which is the highest in nearly 3 months, indicating that the subsequent external inventory has declined. This will improve Zhenlun zinc, will also provide a certain boost to Shanghai zinc. Generally speaking, Shanghai zinc festival before or shock operation.

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