Macro environment remained loose, improved consumption boosted zinc prices

SHANGHAI, Mar 1 (SMM) — Overseas macroeconomic news continued to be positive last week. Fed Chairman Powell made a speech to downplay the risks of inflation and economic overheating, and said that the US market was still a long time away from recovery. It also shows that the Fed has a high tolerance for inflation and is expected to maintain loose monetary policy. The progress of the US 1.9 trillion stimulus bill should be monitored this week. In addition, the 0-3 discount of LME zinc further fell to $11.25/dmt as of last Friday, and LME inventories fell 19,550 mt from the level before the holiday, indicating that overseas consumption was gradually recovering. On the whole, the macro-loose environment and the recovery of fundamentals are expected to resonate, supporting the strong trend of LME zinc.

The situation of domestic zinc ore in various regions was different, but the overall tight situation did not changed. TCs for domestic zinc ore are expected to drop 150 yuan/metal mt to 3,850 yuan/metal mt in March, which will support zinc prices in the near term. The downstream will resume work and production, and will quickly return to high-load production in March. The peak consumption season of March and April can still be expected. In addition, although the current high zinc prices inhibited corporate restocking willingness, when the downstream raw material inventories are consumed to a low level, companies will still provide an increase in zinc consumption for rigid demand restocking. In terms of inventories, stocks of zinc ingots stood at 123,000 mt in February. The overall inventories of zinc ingots stood at about 130,000 mt, basically in line with pre-holiday expectations. In summary, the fundamentals of zinc will pick up and improve, and zinc prices will run on the strong side when consumption fully recovers.