SMM January 10 News:
From the overall situation in December, the days of raw material inventories at smelters continued to increase, and the fundamental imbalance gradually eased. The price fluctuations of various non-ferrous metals varied, with the average spot price of zinc ingots up 2.03% MoM from November, while the average spot prices of aluminum ingots and copper ingots fell by 3.67% and 0.91%, respectively. Meanwhile, the profits of die-casting zinc alloy 3# and 5# showed an expanding trend. How will the processing fees for die-casting zinc alloy perform in the future? This article will analyze from the perspectives of non-ferrous price spreads and the current actual downstream consumption situation.
First, regarding price spreads, the monthly average zinc-aluminum price spread in December rose from 4,574 yuan/mt in November to 5,853 yuan/mt, up 27.97% MoM; the monthly average zinc-copper price spread narrowed from -49,710 yuan/mt to -48,508 yuan/mt, down 2.42% MoM. The theoretical net profit of 3# alloy increased from 282.97 yuan/mt to 334.14 yuan/mt, while that of 5# alloy rose from 335.87 yuan/mt to 399.06 yuan/mt. The growth in mainstream alloy theoretical net profits was mainly due to zinc prices remaining high, while aluminum and copper prices pulled back. However, from the overall situation in January, the situation has reversed, with corporate profits shrinking and processing fees facing downward pressure.
Furthermore, regarding the current operating rate of die-casting zinc alloy enterprises, it reached 47.56% in December, up 5.41 percentage points YoY. This growth was mainly attributed to the decline in zinc prices and the improvement in downstream inventory demand. Additionally, as some end-user enterprises still have undelivered orders, recent procurement volumes have increased, which has also driven the operating rate of die-casting zinc alloy higher. Regarding end-user orders, although some alloy plants reported a recovery in downstream orders for clothing and luggage zippers, as well as improvements in orders for bathroom hardware and automotive hardware, most alloy plants are expected to gradually cut production as the Chinese New Year approaches in January. Downstream demand is expected to weaken gradually, and the market will enter the off-season. Currently, the processing fees for 3# in Guangdong, Zhejiang, and Jiangsu range from 550 to 650 yuan/mt, while those for 5# range from 1,100 to 1,200 yuan/mt. In Fujian, the processing fees for 3# range from 450 to 550 yuan/mt, and those for 5# range from 1,050 to 1,150 yuan/mt.
In summary, zinc and aluminum prices are currently trending downward, and the zinc-aluminum price spread is expected to gradually narrow in January. Meanwhile, the overall center of copper prices is shifting upward, which may slightly widen the zinc-copper price spread. As a result, the theoretical profit margins for 3# and 5# products may decrease, prompting enterprises to adjust production strategies, thereby exerting downward pressure on die-casting zinc alloy processing fees. Regarding the Shanghai-Guangdong price spread, it has been narrowing since January, shrinking from 120 yuan/mt on January 2 to -70 yuan/mt on January 10. The price of Guangdong 0# zinc ingots exceeded that of Shanghai 0# zinc ingots, compressing corporate profits and putting downward pressure on processing fees. Additionally, the operating rate of die-casting zinc alloy in January is expected to record 36.49%, down 11.07% MoM. Due to the seasonal off-season effect of end-user orders, enterprises may lower processing fees slightly in January to compete for orders.
