[minutes] Energy problems in Europe may stimulate zinc prices to reach annual highs next year. These two points require special attention.

SMM survey: what kind of metal do you like most in 2022?

SMM December 23: at the online zinc live conference hosted by SMM on December 23, Zeng Zihang, senior analyst of SMM zinc industry, made a detailed review of the zinc industry in 2021 and made a prospect for zinc price in 2022. SMM believes that cost will be the main factor determining the focus of zinc operation. In other words, in the later stage, we should pay attention to whether the domestic and foreign electricity prices can fall after the end of winter, and whether the processing fees can rise as scheduled after the mine resumes seasonally. It is estimated that in 2022, Shanghai zinc will run at 20000-25000 yuan / ton, while Lunzinc will run at 2600-3700 US dollars / ton.

1. the tight balance of global zinc concentrates from 2021 to 2022 is expected to have no trend change.

Restorative growth of domestic zinc concentrate production in 2021 the impact of power cuts in Inner Mongolia aggravated the mine end shortage in the fourth quarter.

In 2021, the output of domestic zinc concentrate showed a restorative growth, and from January to October this year, the cumulative output of domestic zinc concentrate increased by 8.74% compared with the same period last year. Profits of zinc concentrate companies have climbed to their highest levels in recent years.

From the perspective of 2020, the main reason for the sharp decrease in zinc ore production is the decline of grade, which will continue to restrict the growth of zinc ore production. After entering 2021, the increase in zinc mine production comes more from the recovery after the epidemic and the reopening of some small and medium-sized mines.

On the other hand, the inventory of raw materials in the refinery is low, and the demand for winter storage still exists. Domestic processing fees are close to import processing fees and continue to decline.

Negative growth of Zinc Mine Import in 2021 focus on single arrival of Refinery Director from November to December

According to SMM statistics, the zinc mine import window was completely closed in the second half of 2021, and superimposed smelters were less receptive to low-price import processing fees. from January to November this year, the cumulative volume of zinc ore imports reached only 3.408 million physical tons, down 2.6 per cent from the same period last year.

SMM compiled the trend chart of zinc concentrate import volume and Lianyungang zinc concentrate inventory from July 2018 to November 2021. Since Lianyungang is the main storage place of imported zinc concentrate, there is a strong correlation between zinc concentrate import and Lianyungang inventory. In addition to Lianyungang, Fangchenggang and Jinzhou Port are all storage places for imported zinc concentrates.

It should be noted that, unlike the zinc ingot inventory in Lianyungang in the third quarter, which is mostly delivered by the smelter director, part of the goods in the fourth quarter is in the hands of traders, accompanied by a reduction in import processing fees.

The raw material inventory of the smelter is at a low level in nearly four years and there is still pressure on the mine side in the fourth quarter.

According to SMM statistics, the smelting end power limit does not alleviate the mine end pressure, and the smelter raw material inventory days are at the low level in the same period of nearly four years. With the seasonal decline of domestic zinc concentrate production, the refinery raw material pressure increases.

At the same time, the inventory of zinc mines in Lianyungang has remained at a level of about 100000 tons this year, which is also at a low level in recent years.

From the trend of domestic and imported ore processing fees, it can be seen that imported ore processing fees were the first to be reduced in September, and the current import processing fees were reported to 750.85 US dollars / ton. Domestic processing fees fell at the end of September, and SMM expects a slight decline in the fourth quarter.

SMM counted the changes of domestic and foreign mineral production in 2022. It is estimated that overseas mine terminal production is expected to increase by about 215700 tons in 2022, and domestic production is expected to increase by about 210000 tons.

II. Power restriction + dumping affects market supply in 2021, it is still necessary to observe the production progress of recycled zinc enterprises in 2022.

Due to the influence of "double control of energy consumption" and power restriction policy in 2021, China's refined zinc output is expected to reach about 6.1 million tons.

China's refined zinc smelters will continue to be affected by "double control of energy consumption" and power cuts in 2021. SMM below details the distribution of China's zinc smelters affected by power cuts this year. China's refined zinc production is expected to reach about 6.1 million tons this year, far less than expected at the beginning of this year.

As for smelters, after entering the fourth quarter, local industrial electricity prices have increased, superimposed by the rise in the price of raw coal, bone glue and other auxiliary materials this year, and the current production cost of the smelter has reached about 6000 yuan / ton. After calculating the sulfuric acid income, the smelting profit is not considerable. Due to cost pressure, some smelters control production and operation.

In addition, the refined zinc production from November to December is lower than the previous forecast, and SMM predicts that China's refined zinc production will reach 6.1 million tons in 2021.

The import window of zinc ingots remained closed in the second half of 2021, and imports fell sharply year on year.

According to SMM research, the import window of refined zinc in 2021 only opened sporadically in the first half of the year. When the import window was closed, there was only a long inflow in the second half of the year. In the year to November, the cumulative volume of refined zinc imports fell 13.5% from the same period last year.

With the landing of the dumping reserves in the second half of the year, the market supply has been significantly replenished, which also leads to weaker market long-term expectations. While overseas is still in the post-epidemic consumption recovery driven by the continuous removal of the treasury, internal and external price comparison continues to be revised down, the window is closed.

Therefore, on the whole, SMM believes that it is difficult to open the zinc ingot import window in the fourth quarter of this year, and the monthly import volume of refined zinc is expected to remain low. In 2022, the window is expected to open in the second and third quarters without the addition of dumping reserves.

Zinc ingot dumping reserves reached 180000 tons by November 2021

According to statistics, the dumping reserves of zinc ingots reached 180000 tons by November 2021, making up for the reduction in production and imports caused by power cuts in the market. The dumping sites are mainly distributed in Hunan, Hubei, Henan, Guangxi and other places.

From the point of view of the storage time of zinc ingots, the number of zinc ingots after 2008 has reached 112000 tons, which means that the current state storage zinc ingots inventory is still considerable.

Delayed release of recycled zinc capacity in 2021 attention to the progress of production next year it is estimated that the output of refined zinc will reach 6.32 million tons in 2022.

According to the investigation and statistics of SMM, the production capacity of hot-dip galvanized alloy in China is 950000 tons / year, and that of die-casting zinc alloy is 280000 tons / year.

In 2021, the production capacity of domestic recycled zinc enterprises has been delayed, and the actual production time of many enterprises is expected to be in 2022 and early 2023. SMM will continue to monitor the progress of production next year.

III. The zinc consumption sectors in 2021 will rise first and then suppress the bright spots in 2022.

Galvanized structural parts enterprises have been hanging upside down for a long time, the increment of galvanized consumption is mainly provided by galvanized sheet.

According to SMM research, galvanized structural parts enterprises continue to be in production upside down in 2021, on the one hand, because raw materials soar + terminal high price acceptance is low, both ends squeeze galvanized enterprises; on the other hand, a large number of galvanized structural enterprises are put into production this year and next year, under the industry overcapacity, the price war leads to low profits in the industry.

At present, the profit of structural parts is mainly due to the rapid decline of hot coil cold rolling at the raw material end, and the current enterprise order situation is not optimistic. And in the fourth quarter, environmental protection warnings in various parts of the north continued one after another, seriously affecting the production and operation of enterprises.

In addition, the main increment of galvanized consumption this year is provided by galvanized sheet, and cumulative production increased by 17.05% year-on-year in the year to September. The popularity of export orders can be said to play an important role.

Terminal consumption in 2021 is mainly provided by real estate completion and exports.

Comparing the trends in 2021, including real estate, infrastructure investment, car production and galvanized sheet exports, it can be concluded that end consumption will be mainly provided by real estate completion and exports in 2021.

High shipping costs, tight containers, poor export orders, power cuts in Guangdong continue to affect the start-up of enterprises.

The operating rate of die-casting zinc alloy enterprises in the first half of the year is better than that of last year, but at present, due to shipping problems, export orders are not good, traditional Christmas export orders do not see a significant increase, die-casting plate shows a "peak season" situation.

On the other hand, Guangdong continued to be affected by the power restriction policy in the third quarter of this year, and the production of local die-casting enterprises was limited.

In the long run, there is a strong negative correlation between inventory in Guangdong and the operating rate of die-casting. In the second half of this year, due to power cuts in Guangxi and Yunnan, the inventory of zinc ingots in Guangdong is relatively small, resulting in low inventory. At present, with the recovery of smelter production, inventories in Guangdong have gradually rebounded.

The smooth operation of zinc oxide still needs to boost the tire demand in the future.

As for zinc oxide, the start of zinc oxide enterprises has been relatively stable this year, and SMM expects that the tire sector will still be able to support zinc oxide consumption when car production is steady and improving next year.

Feed plate orders due to the pig industry is depressed, the performance is weak throughout the year.

The influence of end-to-end power limitation of domestic zinc consumption in 2021 is obviously reduced after October. Pay attention to whether there will be any new situation in the heating season.

Domestic power cuts not only affect upstream enterprises, consumers are also doomed. According to the statistics of SMM on the impact of power cuts on domestic zinc consumption in 2021, the impact of power cuts on consumers is significantly reduced after October, and it is necessary to pay attention to whether there will be a new situation after the arrival of the heating season.

Pay attention to refinery cost and consumption toughness in the fourth and fourth quarter. The contradiction of zinc ingots in 2022 still lies in the ingot end.

The anchor of on-site capital trading in the long term is that there is no obvious contradiction at the mine end. It is estimated that the processing fee range for next year: 3500 to 4500 yuan / metal ton.

From a long-term point of view, the anchor of on-site capital trading lies in the mine side. According to the SMM survey, in 2021, the contradiction at the mine end is not obvious, the processing fee does not show a trend, and the zinc price returns to the ingot end pricing. SMM predicts that the range of processing fees next year will be between 3,500 yuan and 4,500 yuan per ton of metal.

This year, the spindle end determines whether the price inventory can be removed seasonally.

From the above picture, it is not difficult to see that the supply and demand of zinc ingots determine the valuation of zinc prices this year.

Dumping and replenishing market supply in the second half of this year, after the first two dumping and landing, we can see that as the national zinc ingots reach the downstream inventory, the national social inventory shows a small accumulation.

In the future, we need to continue to pay attention to inventory changes and whether inventory can be removed seasonally.

SMM believes that in the short term, zinc supply and demand are weak and lack of core contradictions, while the expectation of monetary tightening by the Federal Reserve suppresses zinc prices. However, inventories are still at this year's low, and smelter cost support still exists to support zinc prices.

Energy problems in Europe lead to refinery production reduction + Lme zinc inventory shortage in Europe rapid expansion of back structure of Zinc

From mid-October to now, the energy problem in Europe has become more and more prominent. The three major European smelters in Trafigura have reduced production by 50% due to electricity and other problems, and the duration is unknown. The Auby smelter in France will begin maintenance from the first week of January 2022; at the same time, Glencore's four major European smelters have off-peak production, including an Italian smelter with an annual production line of 100000 tons / year overhauled to the end of December.

Against the backdrop of falling inventories in Europe and the United States, production cuts by European refineries have contributed to the tension of spot stocks in Europe, where spot water rises as high as about $290 / tonne, pushing up the structure of lme0-3.

Recently, the European electricity price has climbed to the previous high again, and the electricity price is still under great pressure on the smelter, so we still need to pay attention to the further developments of the European refinery in the future.

Maintenance of tight balance at mine end and continuation of shortage of spindle end in 2022

According to the supply and demand balance table sorted out by SMM, the domestic mine end will continue to maintain a tight balance in 2022, and the shortage of ingot end supply will continue. This situation may improve until 2023.

2022 Zinc Ingot Price Forecast Rhythm Market

SMM believes that the overseas energy problem in 2022 is still the biggest risk point, and at present, the upward shift in refinery costs brought about by electricity prices in the first quarter is difficult to alleviate. If European refineries further extend the cut-off time and step up production cuts, it will push zinc prices up quickly, and the annual peak is expected to appear in the first quarter. Throughout the year, SMM believes that cost will be the main factor determining the focus of zinc operation. In other words, in the later stage, we should pay attention to whether the domestic and foreign electricity prices can fall after the end of winter, and whether the processing fees can rise as scheduled after the mine resumes seasonally. It is estimated that in 2022, Shanghai zinc will run at 20000-25000 yuan / ton, while Lunzinc will run at 2600-3700 US dollars / ton.