[SMM Analysis] Why is there still room for zinc prices below the new low?

SMM6 20 June news:

In the morning, the main zinc contract in Shanghai fell rapidly, falling 19660 yuan per ton, refreshing the lowest level since March. Why Shanghai zinc bottom again, whether the follow-up will continue to explore, SMM analysis is as follows:

Last night, Shanghai zinc broke the 20000 yuan / ton integer gate, and failed to rise in time, but for a period of time, the market bearish sentiment on zinc prices increased again, thinking that the 20000 yuan / ton integer gate evolved from support to suppression, and the downward space of zinc prices expanded again compared with the previous period. Look at the reasons for the downward price of zinc from the two aspects of supply and demand.

Supply side: since June, more domestic smelters have finished maintenance, resumed normal production, superimposed processing fees remain high and stable, has been in the vicinity of 6500 yuan / ton, high profit stimulation, smelter production enthusiasm will not decline. According to SMM research, domestic refined zinc production is expected to increase by 21100 tons to about 525300 tons in June compared with May.

From the embodiment of inventory, we can also see that the pressure on the supply side is gradually increasing. At present, more than half of the social inventory in Shanghai, Guangdong, and Tianjin has increased since the end of May, indicating that after the smelter resumes normal production, the increase in inventory has been gradually reflected. Under the condition that processing fees remain stable for the time being, the subsequent accumulation of stocks is expected to increase further.

Consumer side: from the market to spot quotation, we can see that since 6.15 delivery, spot rising water fell rapidly, but still failed to boost more downstream transaction volume, the market is more bearish about zinc prices, procurement tends to be cautious, poor willingness to receive goods. From the primary consumer point of view, galvanizing since May due to the cost of hanging upside down, poor orders and other problems, basically maintain on-demand buying, purchasing volume to less. Die-casting zinc alloy and zinc oxide and other sectors, not only face orders weaker than the same period in previous years, but also because foreign trade orders affected by Sino-US trade frictions, some decline. Overall, the consumer side performance is poor, follow-up attention to whether the policy side will release infrastructure news, thus giving some support to zinc prices.

Generally speaking, under the condition of continuous accumulation of stocks, there are no signs of warming on the consumer side. SMM believes that for the 1908 contract, the suppression of the upper 20000 yuan / ton integer gate is still strong, and it may be maintained near the lower track of Brindao in the short term, but if the speed of inventory accumulation is accelerated, perhaps the zinc price will also accelerate the downward pace.