[SMM analysis] the surge in crude oil has led to an increase in zinc prices by more than 2 per cent, but the upper space may be limited.

SMM4, March 3: since March 23, Shanghai zinc 2005 contract continued to rebound, today all the way up to 15565 yuan / ton, as of today closed at 15560 yuan / ton, up 2.4%.

On the supply side, the long-term collapse in zinc prices has eroded the profits of overseas mines. At present, overseas mines are already in a state of production reduction, but the supply of foreign mines has not become scarce. According to SMM, production at Boliden's Tara mine in Ireland has resumed and production was suspended from March 3 to 28 due to epidemic prevention measures taken by Ireland. However, due to the reduction of the supply of imported mines and the collapse of zinc prices, the supply is on the tight side, but in the later stage, the superimposed processing fees are reduced, and the domestic mines will release their output.

On the inventory side, as of Friday (April 3), according to SMM, the total inventory of zinc ingots in SIM7 was 292600 tons, down 11400 tons from Monday (March 30) and 14400 tons from Friday (March 27). Stocks fell sharply, helping to boost zinc prices.

On the consumer side, galvanizing, in April, the operating rate of large galvanizing enterprises remained at a high level of about 80%, some of which will rise to full capacity production, but affected by the overseas epidemic, the pressure of export orders is greater than expected, and the pressure of finished goods inventory is greater than expected. On the other hand, the small galvanizing plant still maintains a low operating state. In the aspect of die-casting zinc alloy, most of the domestic die-casting zinc alloy enterprises do pre-node orders, and at present, the inventory in the factory is high, and the terminal consumption is not bright. In terms of zinc oxide, Europe is trapped by the epidemic and has to restrict the normal life and production of local residents and enterprises, resulting in a phased shutdown of the automobile industry in Europe and the United States. Zinc oxide is dragged down by the automobile industry, export orders are reduced, and terminal demand is limited.

SMM believes that driven by the sharp rise in crude oil, zinc prices have also risen slightly. However, at present, the number of new confirmed cases in the world has exceeded 1 million, and the number of deaths in Spain, France and Italy has also accelerated, indicating that the overseas epidemic situation is still grim. Global demand will limit its upward trend, and space above zinc prices is expected to be limited.

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