Chinese New Year Approaching, Low-Grade Zinc Oxide Coefficient Slightly Declines [SMM Analysis]

SMM, January 17:

Recently, the low-grade zinc oxide coefficient has dropped back slightly. What are the reasons behind this, and what will be the future trend? An SMM survey of some low-grade zinc oxide enterprises has summarized the following reasons:

Supply side, as January approaches the Chinese New Year, terminal construction gradually halts. Coupled with the decline in ferrous metals prices and reduced steel mill profits, steel mill production has slightly decreased. The undersupply in the steel ash market has made it difficult for low-grade zinc oxide manufacturers to maintain stable supply. Moreover, as the primary raw material for low-grade zinc oxide, steel ash prices remain at a high level. Additionally, environmental protection measures in Hunan have impacted production, leading to a reduction in low-grade zinc oxide output. However, according to SMM, imported low-grade zinc oxide has supplemented the market to some extent, slightly alleviating the tight supply situation.

Demand side, according to SMM, most recycled zinc enterprises have entered the Chinese New Year break in January, reducing stockpiling demand. Previous restocking activities have already been completed, and many end-user enterprises are considering using other zinc-containing scrap for production. This has led to a decline in demand for crude zinc and recycled zinc, weakening overall demand and resulting in a supply and demand balance where both sides are weak for low-grade zinc oxide.  

In summary, the low-grade zinc oxide coefficient has slightly decreased. According to SMM, market activity is expected to further weaken due to the Chinese New Year, and some low-grade zinc oxide enterprises will also enter the holiday period. It is anticipated that low-grade zinc oxide prices will likely remain stable in the near term.

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