The price of zinc is strong on the outside and weak on the inside. [institutional Review]

Recently, the fluctuation of zinc prices at home and abroad has intensified, rising and falling as a whole. High energy costs in Europe, reduced production by zinc smelters and great supply disturbances, while the surge in Lunni led to a collective rise in the non-ferrous sector, the price of lun zinc once hit a new high since listing, and zinc in Shanghai also rose to the highest level since 2015. After LME intervened and announced the suspension of Lunni trading, the superimposed domestic consumer demand continued to be weak, strong outside and weak inside, and Shanghai zinc fell sharply after rising.

Energy disturbance intensifies in Europe

Due to the impact of high energy consumption costs, the profit of zinc smelting in Europe is on the low side, and large smelters represented by Xinxing and Glencore have announced production cuts since October last year. According to ILZSG statistics, the annual output of zinc ingots in Europe is about 2.4 million tons, accounting for about 18% of the world's total output of zinc ingots, making it the second largest producer of zinc smelting. European zinc ingot smelters are highly concentrated after a long period of industry consolidation and mergers. Xinxing and Glencore have a number of zinc smelters with an annual output of more than 600000 tons. Together with Boliden, three smelters cover more than 80 per cent of Europe's production capacity. So far, European zinc smelters have reduced their production by an average of 20,000 tons per month, accounting for about 1.67% of the global average monthly capacity.

The cost of fuel and electricity is relatively high in zinc smelting, and the shortage of fossil fuels in Europe leads to a continuous rise in electricity prices, which is the main reason for the reduction in zinc smelting production. Countries with a high proportion of fossil fuel power generation are also the hardest hit areas for zinc reduction and shutdown. At present, zinc smelting reduction mainly occurs in Spain, Germany, the Netherlands, Belgium, Italy and other countries, with the exception of Germany. Natural gas power generation accounts for a high proportion in the power structure, with natural gas power generation accounting for 59% in the Netherlands, 48% in Italy and 27% in Spain. In the cost of zinc smelting in Europe, the power consumption of per ton zinc smelting is about 3700KWH, which is higher in basic metal smelting, second only to aluminum. Before the sharp rise in electricity prices in Europe, electricity consumption accounted for about 55 per cent of the cash costs of zinc smelting in Europe. As electricity prices rose all the way in Europe, electricity costs once accounted for 85 per cent of the cash costs of zinc smelting, and smelting profits were severely squeezed. Overseas inventories continue to decline as supply shrinks in Europe intensify. As of March 14, LME zinc ingot warehouse receipt inventory was 140500 tons, down 47.3% from a year earlier, setting a 19-and-a-half-month low, and the number of warehouse receipts in Europe was very small. as of March 14, the number of warehouse receipts in Europe was 525t, down 98.3% from a year earlier, causing the spot water rise of zinc ingots in Europe to exceed US $400 / ton at one time.

The downstream demand for zinc is weak.

Domestic zinc consumption continues to be weak. Galvanized plate accounts for the largest consumption of zinc processing, accounting for 64%. As of last week, the start-up rate of galvanizing had dropped to 69.59%. Due to the impact of environmental protection, enterprises in some parts of the north had reduced production to varying degrees, galvanizing production decreased compared with the same period last year, and inventory was higher than the same period last year, making the willingness to purchase upstream zinc ingots on the low side. In terms of galvanized tubes, large factories basically maintain normal production, but sales are not smooth, and there is a great pressure on the inventory of finished products in enterprises. In terms of galvanized structural parts, the overall performance is still poor. On the one hand, the transportation is not smooth due to the epidemic, and the enterprise cost increases again in the case of a surge in freight costs; on the other hand, the landing of terminal projects is difficult, and enterprise orders are less. In the case of rising raw material zinc ingots and hot rolls, it is difficult to raise processing fees, enterprise profits hang upside down, and there is a phenomenon that orders are transferred to large and medium-sized enterprises, and it is difficult for small and medium-sized enterprises to survive. Therefore, the overall zinc demand is weak, and domestic zinc ingot stocks accumulated to 274200 tons, an increase of 15.4% over the same period last year.

The price comparison between Shanghai and Lun may pick up.

At present, the trend at home and abroad is divided, overseas supply is disturbed greatly, LME continues to go to the warehouse, inventory is low compared with the same period last year and the concentration of warehouse receipts is high. Although the domestic supply side is tight, but the demand is weak, zinc ingots continue to accumulate, and the pattern of external strength and internal weakness continues. Last week, the export window of zinc ingots was once opened. under the current price comparison, domestic zinc ingots have made profits, and some zinc smelters and traders have the intention to export. In addition, due to the fact that the price ratio has been in a state of large import losses for a long time, there are still 14500 tons of zinc ingots in China's bonded areas. in view of the high rising water in overseas spot, or attracting the inventory of zinc ingots in the bonded areas back overseas, it is expected that the extreme situation of the price difference between the two markets will be reversed and the price of Hulun will pick up.