SHIJIAZHUANG, Oct 25 (SMM) – Pessimism surrounding zinc prices is likely to extend into next year, as Chinese zinc smelters will maintain high production to chase profits. But low inventories globally and economic stimulus measures will offer some support.

China will see a larger refined zinc supply surplus in 2020, said SMM zinc and lead analyst Li Daisheng at the SMM Zinc Oxide Summit in Shijiazhuang, Hebei province.

Li expects zinc production in China to grow 370,000 mt this year to 5.7 million mt. Production hit a record monthly high of 515,700 mt in September, showed SMM data, as capacity bottlenecks have been broken since the second half of the year and profits remained enticing.

Expanding production, however, did not result in substantial inventory accumulation, pointing to strong consumption in China, with galvansing being the top performer.

As of the end of September, social inventories of zinc ingots in China decreased by 74,600 mt from April, showed SMM data.

In the first nine months of this year, Chinese galvanising plants operated at an average rate of 76.46%, up 5.5 percentage points from the same period last year, according to SMM data.

China’s net exports of galvanised sheets rose 13.4% year on year in January-August, while production grew 7.07% during the same period.

Stronger external demand, together with Beijing’s infrastructure push starting from the second half of 2018, and an easing in environmental pressure, drove the galvanising sector.

Alloy die-casting and zinc oxide were subdued this year, however, on the backdrop of weak auto and home appliances production as well as persisting property controls.      

Operating rates at Chinese zinc oxide producers and alloy die-casting mills came in at 50% and 45.31% in January-August, respectively, down 2 and 0.3 percentage points year on year.

With smelters swinging to high gear and miner margins squeezed by low zinc prices, treatment charges for zinc concentrate are likely to see limited upside in the fourth quarter, even as production across mines overseas continue to grow.

Li estimates that zinc mining capacity overseas will expand 850,000-1 million mt in Zn content in 2020, and that China’s imports of zinc concentrate will exceed 3 million mt in 2019.