Supply-Demand of Zinc Ingots to Return to a Tight Balance in December amid Maintenance at Smelters

SHANGHAI, Nov 23 (SMM) – Market focus this week includes the readings of the manufacturing PMI in the Eurozone in November and the Markit manufacturing PMI in the United States in November; the one-year loan market interest rate as of November 22 in China. On the events front, the Federal Reserve FOMC will release the minutes of the monetary policy meeting this Thursday; Bank of England Governor Bailey will deliver a speech this Friday.

There have been several major events last week. The United Nations Climate Change Conference reached the Glasgow Climate Convention; the top leaders of China and the United States held a video summit; and the United States passed a $1.2 trillion infrastructure bill. These events may offer some guidance over the long-term dual-carbon target (carbon peak and carbon neutrality) in China and the benefits that may be brought to the consumption and employment markets in America in the long run. The market has not yet begun to trade on this. LME cash-to-three-month backwardation rose to $37.5/mt after continuous correction. LME stocks keep falling. LME zinc prices are expected to stand at $3,100-3,260/mt this week.

Guangxi Yusheng and Guizhou Southwest Energy Zinc Mining commenced production in November, while Hulunbuir Chihong also officially resumed production on November 16. The output is likely to increase in December and the surplus estimate for December also enhanced. The daily output of Shuangyan was cut by 200 mt last Friday due to environmental protection issues, and the duration is unknown; Hunan Sanli will undergo maintenance for two months in December, affecting 5,000 mt of zinc ingots output in a single month. The supply-demand will return to a tight balance in December. Zinc ingots are unlikely to drop from November to December. The breakeven point for zinc prices stood at 22,300 yuan/mt, which will offer support. The most-traded SHFE contracts prices are expected to stand at 22,500-23,500 yuan/mt this week, and spot premiums of Shanghai zinc will record 20-40 yuan/mt over the December contract.