SMM News: April 16, LME zinc external inventory increased significantly, superimposed the recent strength of the US dollar, so that the price of zinc inside and outside quickly weakened, from the external point of view, the future Lun Zinc is still likely to hand over positions, and the US dollar remains strong. Have caused obvious pressure on the price of zinc. From the domestic fundamentals, the zinc market downstream consumption season is gradually approaching the end, and the main domestic refined zinc production capacity will also be gradually released, it is expected that zinc will continue to bear downward pressure, pay attention to the integer gate 21000 yuan / ton line of support.
Demand in zinc market may fall in the off-season of consumption
Downstream demand, according to data released by the China Association of Automobile Industries, in March, China produced about 2.558 million cars, up 81. 45% from the previous month and down 2. 73% from the same period last year. Car sales were about 2.52 million, up 70.09 per cent from the previous month and down 5.18 per cent from a year earlier. From January to March this year, the cumulative production and sales of cars were 6.3357 million and 6.3724 million, down 9.81 per cent and 11.32 per cent respectively from the same period last year. From the year-on-year data, the car market is showing a seasonal recovery, but from the year-on-year point of view, the car market performance is still not as good as last year, it is difficult for the demand side to form a significant boost to zinc prices. According to the research of Shanghai Nonferrous Network, according to the performance of the primary consumer, galvanizing has overdrawn part of the April consumption due to the tax gap, and the order boost brought by the infrastructure shortage still needs to wait patiently. The terminal expansion space of die casting and zinc oxide is relatively limited and the performance is relatively stable. Generally speaking, the supporting force of capital construction still needs to be observed. In addition, the traditional consumption season in May is about to enter, demand-side performance or cooling.
In terms of premium, from April 15 to April 19, the average premium reported by the Shanghai Institute of goods and Trade was 40 yuan per ton, less than the average of 190 yuan per ton in the same period in 2018 and 208 yuan per ton in the same period in 2017. Spot tipping water is at the lowest level in the same period of nearly three years, indicating that the shortage of domestic spot supply has eased.
On the supply side, processing fees for zinc concentrate remain high. As of April 12, the processing fee for zinc concentrate in the north was 6950 yuan / ton, 3500 yuan / ton in the same period last year, 6350 yuan / ton in the south and 3250 yuan / ton in the same period last year. The processing fee for imported zinc concentrate is 255 yuan per ton, compared with 20 yuan per ton in the same period last year. As of April 12, the profit of the zinc refining smelter was 3913 yuan / ton, down 26 yuan / ton from last week. The level for the same period last year was 929.6 yuan per ton. In the medium term, the supply of zinc concentrate continues to increase, different from domestic mines, the production of overseas mines is less constrained by policy, and the recovery of production is faster. New Century2019's zinc production rose 50.4% to 18170 tons in the first quarter of the year compared with the fourth quarter of 2018, according to a report on the foreign network. The increase comes mainly from the Century Zinc Mine in Queensland, Australia, where the production efficiency of the concentrator has improved since August 2018.
In terms of production, according to the National Bureau of Statistics, China's refined zinc (electrolytic zinc) production rose 0.4 per cent in March 2019 from a year earlier to 453000 tons. From January to March 2019, the output was 1.306 million tons, down 8.02% from the same period last year, and the cumulative year-on-year decline was 3.06% lower than that from January to February, indicating that the growth rate of domestic refined zinc production has increased. In the future, the production capacity of Zhuzhou smelting and Hanzhong zinc industry will also be gradually released, and the supply of domestic zinc ingots will be gradually increased. At that time, there will be some pressure on the supply side of zinc prices.
External spot rising water to maintain a high position in the later stage, there is still the possibility of delivery of zinc and zinc in the later stage.
As of 23 April, LME zinc stocks stood at 76825 tons, an increase of 3250 tons over the previous trading day; Recently, the external inventory reappeared the collective delivery of positions, April 16, LME zinc stocks increased by 10350 tons, although from an absolute level, inventories are still low, but the increase is significant. It is worth noting that the spot discount of the external market may have a certain relationship with the delivery position. Recently, after the external spot water rose more than $100 / ton, there has been a delivery position, for example, on April 16, LME zinc spot water rose to $103 / ton, while on April 23, LME zinc spot water rose to $100 / ton. However, the spot rally on the outside market remained high, which could lead to a continued increase in external inventories, with a spot rise of $94 per tonne in LME as of April 23. At a later stage, it may also lead to the delivery of the outer disk. In addition, from the write-off warehouse receipt point of view, as of April 23, LME zinc write-off warehouse receipt accounted for 3.45%, at a low level. The proportion of write-off warehouse receipts is low, indicating that the short-term output of external inventory is less, it is difficult to decline.
The strength of the US dollar puts pressure on zinc
On the evening of April 23, the dollar strengthened, hitting a new high in a month and a half. Judging from US macro data, US new home sales rose to a nearly one-and-a-half-year high in March, and the dollar strengthened last week when German manufacturing PMI fell short of market expectations. The strong performance of the US economy relative to the EU and Japan will boost the dollar in the short term, putting pressure on zinc.
To sum up, the strength of the US dollar will put pressure on zinc prices, and the reversal of domestic fundamentals will also put some pressure on the zinc supply side. Zinc prices are expected to come under downward pressure, focusing on changes in external inventories and the impact of dollar movements on zinc prices.