[special topic of the year] the Shanghai Zinc Index has risen by more than 20% this year. How will the price of zinc go in 2021?

SMM12 March 22: 2020, zinc prices twists and turns. Under the influence of the domestic epidemic in the first quarter, the Shanghai zinc index hit a new low, breaking the Wanliu mark. In March, the domestic epidemic was gradually brought under control, but the overseas epidemic continued to ferment, and zinc prices fell again, hitting a new low of 14265 yuan per ton since mid-April 2016.

In the second quarter, overseas countries announced that their economies had been restarted one after another, market sentiment picked up somewhat, and the Shanghai Zinc Index bottomed out and rose again. In the third quarter, the Shanghai zinc index showed a trend of rising first and then suppressing it. On September 1st, zinc prices rose to 20385 yuan / ton, the highest level since mid-late June 2019, and then fell slightly.

SMM domestic zinc concentrate weekly TC (yuan / metal ton)

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In the fourth quarter, due to the continuous decline of domestic zinc concentrate TC, as of December 18, the processing fee of domestic zinc concentrate was 4150 yuan per metal ton, the lowest since mid-late September 2018, and the supply of zinc ore is still tight, supporting zinc prices to some extent. Zinc prices reached a new high of 22275 yuan / ton. As of the noon close of December 22, the Shanghai Zinc Index was at 21835 yuan / ton, up 21.68% for the year.

SMM believes that in the short and medium term, the tight situation of mine supply is still difficult to effectively reverse, and smelters will reduce production and maintenance materials may continue to increase. At the same time, with the introduction of the vaccine, the market has a strong expectation of economic recovery next year. Under the resonance of macro and fundamentals, we believe that there is still room for zinc prices to rise further in the first half of next year. In the long term, the anchor of on-site capital trading lies in mines, and then the epidemic market focuses on the recovery of overseas supply. According to SMM estimates, mine supply will gradually turn into surplus in the second half of next year, which will also suppress prices. Overall, the price of zinc will rise first and then decline in 2021. LME zinc price: 2300-3000 US dollars / ton, SHFE zinc price: 18500-23500 yuan / ton.

Market viewpoint

Meierya Futures: the loss of zinc raw materials caused by the epidemic exceeds market expectations, but at present we are still in the release cycle of new production capacity of zinc concentrate, and it is expected that global zinc concentrate production will recover next year. The intensity and pace of the actual incremental release will provide an important guide to zinc prices. With the large-scale promotion of vaccines, the logic of zinc price trading in the market will revolve around the game between the expectation and reality of overseas demand recovery. Domestic demand is expected to remain resilient next year, and given the weakness of the US dollar and the support of inflation expectations, we remain cautiously optimistic about zinc prices in 2021, and prices may still have upward flexibility.

Citic Futures: the macro expectation in the first quarter of 2021 is strong, the supply of superimposed zinc ore is still tight, and zinc prices are likely to continue to operate at a high level. However, after the second quarter, the dollar index may stabilize and recover, zinc mine supply slowly loosens, zinc smelting output continues to rise, and domestic real estate and infrastructure constraints increase, zinc prices face high downward pressure. Therefore, the operation, it is recommended that the first quarter of zinc to wait-and-see or short-term operation is appropriate, after the second quarter to seize the opportunity to sell high.

South China Futures: uncertain factors such as the epidemic situation lengthen the production cycle of zinc mines, and the overall increment is limited to a certain extent. It is expected that zinc ore supply will be tight before and after 2021, while processing fees may gradually increase after the first quarter. Therefore, under the premise that the supply of raw materials is relatively tight and the low processing fees affect the enthusiasm of smelting production in the first half of 2021, we expect zinc prices to remain strong, easy to rise and difficult to fall. Second, as the overseas economy continues to recover, exports and foreign consumption will continue to improve; infrastructure and real estate as the main end demand for zinc, domestic zinc consumption remains strong and resilient. On the whole, 2021 may be near the end of the zinc mine production cycle, the supply will be more relaxed in the second half of the year, and the surplus of zinc ingots will be more obvious. Although there is support for consumption, it is difficult to have bright spots. Overall, we believe that zinc prices are stronger in the first quarter or the first half of the year, superimposed by macro expectations, there is still a driving force to continue to rise, the second half of the year is expected to fluctuate, price pressure will appear. It is estimated that the operating range of zinc in Shanghai in 2021 is [18000 yuan 23000] yuan / ton.

Yide Futures: due to the current fundamentals are relatively good, zinc prices are expected to be supported in the future, and the future will focus on processing fees and inventory. In addition, the author predicts that the overall zinc price in 2021 will show a high trend before and after a low trend, and the probability will be maintained in the oscillation range of 18500 Mustang 22500 yuan / ton. If the recovery of zinc ore supply is far less than expected, the possibility of a further upward breakthrough in zinc prices cannot be ruled out.