2021 Shanghai zinc brush nearly 14 years high European energy crisis or stimulate zinc prices continue to rise in 2022? [SMM Annual Review]

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

SMM January 3: 2021 has passed, and 2022 is coming. Looking back at the zinc market in 2021, zinc prices have gone out of the roller coaster in a steady state. Shanghai zinc even unexpectedly ushered in the first limit of the year in mid-October. On October 18, Shanghai zinc rushed to a high of 27720 yuan / ton, which directly refreshed the new high since August 2007. By the end of daytime trading on December 31st, Shanghai zinc owners had even reported 24125 yuan / ton, up 3220 yuan / ton from the beginning of the year and 15.4% this year.

"Click to see the futures market.

On the spot side, according to SMM spot prices, as of December 31, the average spot price of SMM zinc ingots was 24160 yuan / ton, up 3120 yuan / ton from the beginning of the year, or 14.8%.

"Click here to view the price of SMM zinc products.

Fundamentals

Mine end: in terms of zinc concentrate, under the influence of multiple factors such as the decline of mine grade, power restriction and double control of energy consumption, the output of domestic zinc concentrate in 2021 is lower than expected. According to SMM statistics, the national zinc concentrate output in 2021 was 4.1 million metal tons, an increase of 150000 metal tons over the same period last year.

Smelting side: in 2021, the production control of the smelter brought about by the double control of energy consumption, power restriction or the price of raw materials and auxiliary materials, as well as the shortage of operating funds, have caused frequent disturbances in the production of the smelter, resulting in the domestic refined zinc output far below the market expectations. According to SMM statistics, SMM's domestic refined zinc production was 6.106 million tons in 2021, an increase of 0.03% over the same period last year.

In terms of imported zinc:

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 expects the import window to open in the third quarter of 2022, which will also stimulate the inflow of imported mines, which are expected to increase by about 20, 000 to 50, 000 tons of metal.

Inventory:

SMM's weekly zinc ingot inventory totaled 120100 tons as of December 31, down 18.63% from 27500 tons at the beginning of the year, according to SMM.

Click to see more SMM zinc industry chain data

Downstream consumer side:

Galvanized plate: zinc consumption in the galvanizing industry is expected to increase by 4.3% in 2021 compared with the same period last year. This year, domestic galvanizing consumption is driven by a substantial increase in exports, consumption to another level. However, compared with the eye-catching performance of exports, domestic consumption is relatively weak, and galvanizing enterprises are also affected by power restrictions, environmental protection, sharp increases in raw material prices, upside down profits and other factors, which have restrained the start of work, but the overall growth is still relatively large.

Die-casting zinc alloy plate: at the initial stage, due to the strong demand of export orders, the start-up of the alloy plant is kept at a high level. However, with the passage of time, the zinc alloy market is facing more and more problems, such as power restriction, real estate-related demand decline, export container freight rising sharply, epidemic situation and so on, resulting in insufficient stamina of die-casting zinc alloy.

Zinc oxide plate: the overall consumption increment of zinc oxide plate in 2021 is limited. Tire production has achieved positive growth, leading to a pick-up in zinc oxide consumption, but ceramics and feed sectors are a drag on consumption. In addition, the zinc oxide plant has increased the use of zinc slag this year, resulting in a decline in demand for zinc ingots.

Overall, in the context of a steady global economic recovery and appropriately loose global monetary policy, zinc prices in 2021 as a whole are dominated by the logic of mismatch between supply and demand, with a slow rise in the center of gravity.

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Prospect of Zinc City in 2022

For the future trend of zinc prices, SMM believes that overseas energy problems in 2022 are still the biggest risk point. 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 promote zinc prices to rise rapidly, and the annual high is expected to occur 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 20000-26000 yuan / ton, while Lun zinc will run at 2600-3700 US dollars / ton.

Institutional view

Market analyst Fitch: global average commodity prices are expected to fall from current levels in 2022 and most commodity prices are expected to fall year-on-year as supply is expected to improve and demand growth will slow. Among the metal sectors, iron ore, steel and zinc fell the most, followed by aluminium, gold, nickel, copper and lead; Fitch said the macroeconomic background would continue to support next year's commodity demand, which would keep prices above the 2017-2021 average.

Yi de Futures: in 2022, short-term inventory is low to support zinc prices. In addition, due to the influence of policy support in the first half of the year, zinc prices still have a certain upward momentum, but in the later stage, with the gradual emergence of fundamental pressure, the center of gravity of zinc prices will shift downward. On the whole, Shanghai Zinc will operate in the range of 19000 Mutual 26000 yuan / ton. In addition, we need to pay attention to the overall impact of macro news on the metal, arbitrage level can pay attention to internal and external anti-arbitrage opportunities.

Citic Futures: the downward pressure on commodity demand in 2022 is relatively large, while the constraints on the supply side of major commodities will be relaxed, and the supply of major commodities such as coal, crude oil, iron ore, copper, zinc and other major commodities will tend to increase. The pattern of supply and demand is disadvantageous to commodity prices, and commodities as a whole are expected to shift their center of gravity downward in 2022.

In addition, SMM has another article documenting the major events in the lead and zinc market in 2021. For details, please click here to see the original article:

Limit electricity, reduce production and dump storage. How much do you know about the events that triggered the turmoil in the lead and zinc market in 2021? [annual Review]