Why Did the Tianjin Region Operate with a Small Discount Throughout March?[SMM Analysis]

Supply side, the production of mainstream brand smelters in Tianjin was relatively normal in February, with production at approximately 90,000 mt. Some smelters are expected to increase production, with March production estimated at around 95,000 mt, indicating a rise in zinc ingot production. The overall spot zinc supply in Tianjin is expected to ease in March. However, Tianjin zinc ingot inventory remains significantly lower than in previous years, primarily due to a reduction in long-term contract volumes from smelters in 2025 compared to 2024, decreased warehouse storage, and a considerable amount of zinc ingots being directly delivered to downstream users, resulting in fewer arrivals at Tianjin warehouses. The price gap between self pick-up from warehouses and delivery-to-factory prices has widened, leading to reduced downstream procurement of warehouse zinc ingots and making it difficult for premiums to rise.

Demand side, northern consumption improved somewhat in March but remained weak YoY, with the "Golden March" effect not evident. Coupled with the impact of environmental protection-driven production restrictions in Tianjin and Hebei during the Two Sessions, enterprise operations were affected, and transportation was also impacted due to requirements for National VI or new energy vehicles. March consumption recovery fell short of expectations, with galvanising enterprises primarily making just-in-time procurement without significant stockpiling, which suppressed the movement of premiums and discounts. Overall, premiums and discounts in Tianjin struggled to rise.

Looking ahead, current sulphuric acid prices continue to rise, combined with the ongoing increase in zinc concentrate TCs, smelters have largely turned losses into profits, and production enthusiasm is relatively high. Zinc ingot production in Tianjin is expected to remain robust, with overall spot supply relatively ample. As the Two Sessions conclude, consumption is expected to gradually improve, downstream purchases of zinc ingots may increase, and premiums and discounts are likely to see steady gains.