From a macro perspective, the US dollar fell, and most non-ferrous metals prices rose. China's issuance of government bonds boosted confidence over consumption, and macro sentiment improved. However, Europe cut interest rates ahead of schedule, which calmed market sentiment. Fundamentally, mines in north China will basically resume production in April. Overseas, while BMC Minerals' Kudz Ze Kayah (KZK) zinc-lead-copper project is expected to proceed, production cuts and suspension at Volcan and Glencore will keep zinc concentrate tight, forcing smelters to cut production. Smelters’ output is expected to remain at a low level of around 500,000 mt in April.
Customs data was released last week, and the overall import volume was basically in line with expectations. The improvement in ore import volume in March is expected to be limited, while zinc ingot import volume may increase to about 30,000 mt. In terms of downstream consumption, galvanising consumption improved with ferrous metals prices stopping falling and the end of environmentally-driven production restrictions in the north. Operating rates of die-casting and zinc oxide remained stable. Moreover, due to the lower zinc price during the week, downstream purchases increased. Overall, zinc prices are unlikely to fall under the background of ore shortage.
However, considering that consumption has not improved significantly yet, and imported zinc ingots are still being replenished, social stocks can hardly be significantly destocked in the short term. Zinc prices will lack impetus to rise.
Forecast: SHFE 2405 zinc contract prices: 21,000-21,800 yuan/mt
LME zinc is expected to trade between $2,450-2,650/mt.
Spot discounts in Shanghai against the SHFE 2404 zinc contract are expected to move between 80-0 yuan/mt.
