At the 2023 SMM 12th Metal Industry Annual Conference - SMM Zinc Industry Annual Conference co-sponsored by SMM, Chongqing Jiangjin District People's Government, and Shanghai Stock Exchange, Han Zhen, SMM senior zinc analyst, gave an outlook on the zinc market in 2024 and prediction of long-term contracts. She said that on the mining side, the increase in overseas zinc ore production in 2023 was less than expected, and the output may increase significantly in 2024. In terms of imports, the opening of the zinc concentrate import window in the second quarter of 2023 stimulated inflows of imported cargoes, and it is expected that the imported zinc ores may remain high in 2024. The pressure on the supply side is increasing, and China's zinc ingot supply may show a slight surplus in 2024.
In 2023, the price of auxiliary materials fell back, and the cost of domestic mines dropped to 13,000 yuan/mt with metal content.
Since 2023, the price of auxiliary materials has shown a downward trend. In 2023, the cost of domestic mines dropped to 13,000 yuan/mt with metal content. In the same period of 2022, the cost was still 13,800 yuan/mt with metal content.
Overseas zinc ore production growth was lower than expected, and production is expected to increase significantly in 2024
According to SMM research, due to the influence of many factors, the increase in overseas zinc ore production in 2023 was lower than expected, driven mainly by mines in Peru, Australia and Canada. However, in 2024, SMM predicts that overseas zinc ingot production will post a year-on-year increase of about 4%.
Domestic zinc concentrates output to increase 100,000 mt with metal content in 2023
In terms of domestic zinc concentrate production, with the continued decline of zinc prices, the drop in domestic zinc concentrate TCs barely made up for the decreased profit at mines, resulting in poor profit. SMM predicts that the cumulative zinc concentrate production in 2023 will increase by 100,000 mt of metal content year-on-year.
Overseas shipments have increased
According to SMM research, overseas shipments have increased since the start of 2023, and will be gradually transmitted to the arrivals of goods.
As China's Lianyungang Port is the main storage place for imported zinc concentrates, there is a strong correlation between the import volume of zinc concentrates and the inventory at Lianyungang Port, which can to some extent reflect China’s zinc concentrate imports. The inflow of imported ore can be estimated through the inventory changes at this port. Data show that since July, China’s zinc concentrate imports have increased.
The opening of the zinc concentrate import window in the second quarter of 2023 stimulated import inflows, and import volumes are expected to remain high in 2024.
In the second quarter of 2023, the zinc concentrate import window opened, triggering an inflow of imported zinc. According to customs data, China's zinc ore imports increased by 23% year-on-year from January to September. SMM predicts that the volume of imported zinc ores may remain high in 2024.
Imported zinc concentrate TCs fell sharply, reflecting expectations for tight supply
Since entering 2023, the quotations for Imported zinc concentrate TCs have fallen sharply, reflecting expectations of tightness in future zinc ore supply; since the third quarter of 2023, raw material inventories at domestic tightnes have also declined.
In addition, according to SMM research, since the second quarter, the domestic zinc concentrate import window has been opened intermittently, and the inflow of imported zinc concentrate has effectively alleviated the domestic ore shortage.
Refined zinc output in 2024 to reach 6.75 million mt
In terms of refined zinc production, stimulated by high profits, the smelters operating rate has been at a high level compared to the same period in recent years, driving an increase in refined zinc production. SMM estimates that the full-year refined zinc output may reach about 6.75 million mt.
The proportion of alloy output at smelters increased year by year
According to SMM research, smelters further increased the proportion of die-cast alloy production in 2023, and hot-dip alloy production has shown an upward trend since June 2023, with the proportion increasing year by year.
In terms of secondary zinc, with the decline in zinc prices, secondary zinc companies suffered serious losses. However, as zinc rebounded from a low level, the profits of secondary zinc companies recovered from the low level and increased significantly compared with before.
Domestic newly-commissioned smelting capacity 2023-2025
SMM found that most of the newly-commissioned capacity of zinc produced with ore and secondary zinc in China from 2023 to 2025 is concentrated in the second half of 2023 and 2024.
The import window reopened and the inflow of zinc ingots increased significantly
The import window reopened intermittently in 2023. In May, September and other months, when the import window opened, the inflow of zinc ingots increased significantly.
The concentrated start of infrastructure projects in 2023 helped the operating rate of galvanized structural parts plants remain stable
In terms of consumption, the overall trend of domestic galvanizing operation rate in 2023 was relatively stable, mainly driven by the concentrated start of infrastructure projects in 2023.
Under the policy of "Guaranteed Delivery of Buildings", the cumulative year-on-year growth rate of domestic housing completions has turned positive for the first time
Although the sales area of commercial housing has weakened, under the policy of guaranteed delivery of buildings, the cumulative year-on-year growth of domestic real estate completed area turned positive.
Infrastructure investment supports major domestic demand for zinc
Infrastructure investment supports the main consumption demand for zinc in China. Data shows that traditional transportation has achieved high year-on-year growth, while the growth rate of power grid investment has begun to slow down.
Higher exchange rates drive improvement in export orders for galvanized sheets
Since July 2023, as the exchange rate has risen, export orders for galvanized sheets have improved, and the export volume of galvanized sheets has increased, returning to positive growth.
Domestic sales weaken and exports reduce, operating rates at die-casting companies run weakly
In terms of the die-casting industry, according to SMM data, the overall operating rate of die-casting zinc companies remained weak in 2023, mainly due to poor domestic sales and reduced exports, resulting in weak orders in the domestic die-casting industry.
The outstanding performance of automobile semi-steel tire data drives zinc oxide companies to produce beyond expectations
In terms of zinc oxide, since entering 2023, China's automobile production has maintained an overall upward trend, and the operation rate of automobile semi-steel tires has remained high and performed well. This has driven the operation rate of domestic zinc oxide companies to exceed expectations. In 2023, the operation rate of the zinc oxide industry will steadily rise.
Automobile and home appliance data in 2023 exceed expectations
Entering 2023, sales data of automobiles and home appliances have exceeded expectations and achieved positive year-on-year growth.
Domestic inventories remain low and LME zinc inventories begin to decline
In terms of inventory, according to SMM data, domestic visible inventory has remained at a low level recently, and LME inventory has also begun to decline after experiencing a brief increase.
Due to the reduction in the proportion of long-term orders, the monthly finished product inventory of refined zinc smelters has been backlogged, and the finished product inventory is at the highest level in recent years.
Arriving shipments of visible inventory fell sharply amid reduced proportion of long-term orders at traders and cargoes being used as collaterals
As supply pressure increases and imports are expected to increase, domestic spot premiums may fall from high levels.
Low domestic inventories have begun to gradually drive zinc spot premiums in Shanghai, Guangdong and Tianjin. The backwardation in Europe has recently begun to weaken at an accelerated pace.
Supply pressure will increase in 2024
SMM expects that China's zinc ingot market may experience a slight surplus in 2024, and the pressure on the supply side will increase.