Refined Zinc Imports Down 31.79% MoM in Dec 2022 on Falling SHFE/LME Zinc Price Ratio

SHANGHAI, Jan 31 (SMM) - China imported 7,900 mt of refined zinc in December 2022, down 31.79% on the month and 23.24% on the year. The imports totalled 79,200 mt throughout 2022, down 81.76% on an annual basis. The exports of refined zinc stood at 570 mt in December, leaving the net imports at 7,300 mt.

China's top three suppliers of refined zinc were Myanmar (2,500 mt), Australia (2,300 mt) and Kazakhstan (2,300 mt). In December, the domestic import volume decreased month-on-month to a low level mainly because the import window remained closed with LME zinc outperforming SHFE zinc. The majority of the refined zinc imports were under fixed prices set earlier. At the same time, the long-standing closed export window also caused the export volume to decrease, leaving only a small number of cargoes exported.

In December, the core PCE price index increased by 0.3% month-on-month and 4.4% year-on-year, the smallest increase since October 2021. The positive macro sentiment, supported by the improved US inflation and employment data, bolstered the overseas zinc prices. On the fundamentals, despite the fact that electricity prices in Europe dropped, the overseas zinc smelters still suffered losses, which put the production resumption possibility of European smelters at a low point. The supply of zinc ingots in Europe thus will remain low. Although the demand in Europe is weakening, the LME zinc inventory is still at a downward path. Meanwhile, the spot premiums of zinc ingots in Europe have risen, so the low overseas inventory will continue to underpin high premiums.

In the domestic market, with the replenishment of imported zinc ore, the raw material inventory in zinc smelters improved to sustain about 30 days. At the same time, the inventory at Lianyungang Port held at a historical high level of about 140,000 mt. In conclusion, the ore supply was sufficient, and the high profits from high TCs have encouraged zinc smelters to ramp up production. In terms of consumption, more downstream processing enterprises took early holidays for the Chinese New Year (CNY). Although there are strong expectations for consumption recovery after the holiday, it still remains to see the actual outcome. The rising supply and weak demand will still suppress the domestic zinc prices.

On the whole, SHFE/LME zinc price ratio fell constantly to around 7.1, and the import deficit expanded to more than 3,500 yuan/mt. The import window is unlikely to open in the short term. This, couple with the previous CNY break, will result in a decline in refined zinc imports in January.