How did the spot premiums/discounts perform in Tianjin? [SMM Analysis]

According to the SMM survey, the overall spot premiums/discounts in Tianjin fluctuated upward throughout the month, initially rising and then falling. What are the reasons? Can the premiums/discounts rise next month? SMM analysis is as follows:

Supply side, the monthly capacity of major zinc ingot brands in Tianjin was 1.43 million mt. According to SMM survey data, September production was 1.08 million mt. Some smelters underwent maintenance in September, but production resumed in October, with an expected output of 1.29 million mt. Overall zinc ingot production increased compared to September. Warehouse arrivals were relatively low, with some direct shipments to factories, resulting in relatively low inventory levels, which supported the spot market premiums in Tianjin. It is expected that zinc ingot supply in Tianjin in October might be relatively loose, which could suppress the trend of premiums.

Consumption side, in September, policies boosted ferrous metals prices, leading to an increase in galvanized pipe orders. Steel tower orders remained stable, and transportation orders improved seasonally. Downstream operating rates showed an upward trend, and the decline in zinc prices at the beginning of the month led to increased downstream purchasing. Coupled with improved orders and rising operating rates, enterprise procurement increased. However, in the latter half of the month, as zinc prices rose, downstream gradually shifted to just-in-time purchasing, and at the end of the month, restocking increased in anticipation of the National Day holiday. In the context of continued destocking, traders initially had a sentiment to stand firm on quotes, leading to a rise in premiums/discounts. Later, as the futures market gradually rose, traders lowered premiums/discounts to sell. Overall, the spot market consumption in September was favorable, supporting spot premiums/discounts.

Entering October, the resumption of production by smelters increased supply, which might ease the overall supply situation. Additionally, the sustained high zinc prices dampened downstream purchasing enthusiasm. Tianjin also faced environmental protection warnings in October, affecting downstream enterprise operations. Overall, zinc ingot demand in Tianjin in October might be weaker than in September. It is expected that premiums might continue to decline in the future.