At the End of Q1, Review of Die-Casting Zinc Alloy Sector Orders and Market Outlook [SMM Analysis]

SMM March 27: As the traditional peak consumption season of "Golden March and Silver April" has passed its halfway point, how has the consumption of die-casting zinc alloy downstream sectors performed in Q1, and what is the outlook for the future? The following will elaborate on the zinc price background and downstream situation in Q1. First, die-casting zinc alloy, due to its significant zinc usage, is notably influenced by zinc prices in terms of downstream consumption. From the overall zinc price background, Q1 saw zinc prices pull back from highs due to reduced post-holiday demand, followed by a slight recovery as domestic social inventory hit historical lows and downstream demand gradually improved. On the macro front, the Two Sessions post-Chinese New Year had a limited impact on zinc prices, with domestic zinc prices largely oscillating around 23,750 yuan/mt, providing a buffer period for end-use consumption. According to SMM data, China's average operating rate for die-casting zinc alloy in Q1 (January-March) 2024 reached 34.58%, and based on current consumption trends, the operating rate is expected to increase by 3%-5% YoY in Q1 this year. The lower operating rate last year was mainly due to the late Chinese New Year break and delayed consumption, while this year, the "rush to export" in Q1 and strong performance from large manufacturers drove the overall operating rate higher. The following will analyze the consumption of various terminal sectors in Q1 this year. I. Real Estate Sector: Slow Demand Recovery Overall, Q1 marked a recovery phase for real estate construction. Specific data shows that China's cumulative sales area of commercial housing in February fell 5.1% YoY, while the cumulative completed area dropped 15.6% YoY. Winter low temperatures and extreme weather increased construction difficulties, leading to relatively ordinary performance in orders for furniture fittings, hardware, and bathroom accessories. Although the recent decline in zinc prices improved terminal orders for some companies, many attributed this to restocking at lower prices, with actual consumption demand remaining weak. Additionally, companies reported that cut-throat competition remains prevalent in the market, with intense price competition posing potential risks of losing orders for high-quality products due to their higher prices. Looking ahead to Q2, data shows that China's cumulative growth in real estate sales area narrowed from -19.95% in Q1 last year to -19.83% in Q2, while the cumulative growth in completed area expanded from -20.45% to -20.76%, indicating mixed but overall weak performance. The macro policy from the 2025 Two Sessions emphasized "stability" as the core goal for the real estate sector. From company feedback, real estate-related hardware orders are significantly influenced by zinc prices, with demand improving at lower prices and weakening at higher prices. Companies remain cautious about real estate-related orders, and demand has yet to truly recover, requiring a longer transition period. Therefore, whether from data, policy, or company feedback, Q2 real estate sector orders are expected to remain largely stable, with limited demand changes. II. Auto Parts Sector: Policy Support Stabilizes Orders In terms of auto parts orders, as of February, China's cumulative auto production reached 4.553 million units, up 16.2% YoY, while cumulative sales reached 4.552 million units, up 13.1% YoY. The 2025 domestic auto trade-in policy continues, with the China Consumers Association reporting nearly 1.3 million trade-in subsidy applications as of March 14, reflecting strong auto production and sales performance and relatively stable die-casting zinc alloy auto parts orders. Looking ahead to Q2, as the government continues to focus on basic consumption, the trade-in policy is expected to provide some support for auto parts orders. Meanwhile, SMM believes that with the arrival of Q2, domestic supply-side capacity and production are expected to gradually increase, potentially weakening support for zinc prices. At lower prices, terminal demand in the auto parts sector is likely to remain stable. Additionally, based on production and sales data from Q1 and Q2 last year, China's auto production and sales in Q2 were higher than in Q1, with a QoQ increase of 9%-10%. Therefore, Q2 auto parts orders are expected to perform well. III. Luggage Zippers and Electronics Sector: Stable Overall Demand In the luggage zippers sector, small hardware orders have remained relatively stable post-holiday, with some companies reporting a slight YoY increase in orders this year, less affected by prices. March is also a peak season for luggage zipper orders, but due to this year's warm winter, orders in March weakened compared to February, though overall consumption in this sector remains stable compared to others. Domestic die-casting zinc alloy electronics orders are mainly concentrated in companies in Guangdong. Companies report that orders in this high-tech sector have performed well, with strong terminal demand continuing from last year, including end-use products such as electronic components and optical modules. Looking ahead to Q2, April remains a peak season for luggage zipper orders, but downstream zipper orders are currently weak due to weather conditions, and Q2 order development is expected to be relatively ordinary. Meanwhile, electronics orders are operating normally, with companies reporting stable market demand since last year, and Q2 is expected to see little change. IV. Export Orders Sector: Strong Start, Slowing Later In terms of export orders, customs data shows that China's cumulative exports of die-casting zinc alloy in January-February reached 683.21 mt, up 37.89% YoY, with the "rush to export" phenomenon still present in the first half of Q1. However, some companies recently reported a decrease in orders to Europe and the US, while orders to Southeast Asia remain stable. Other companies noted that overall export orders are stable, with the impact of US tariffs not yet fully apparent. In addition to potential tariff impacts, the ample inventory held by foreign traders also affects domestic export orders. Therefore, Q2 export orders are expected to face some reduction risks due to tariffs and other factors. In summary, Q1 saw slow recovery in actual terminal demand for die-casting zinc alloy in the real estate sector, while orders in other sectors remained relatively normal. Post-holiday demand for daily small hardware orders performed well, and the future development of export orders requires close attention, with potential risks likely to emerge gradually. Recent domestic macro policies have released positive expectations, with the Ministry of Finance indicating a more proactive fiscal policy in 2025. As the weather warms and downstream demand gradually recovers, domestic zinc alloy terminal demand is expected to continue improving. (The above information is based on market collection and comprehensive evaluation by the SMM research team. The information provided is for reference only. This article does not constitute direct investment research advice. Clients should make decisions cautiously and not use this as a substitute for independent judgment. Any decisions made by clients are unrelated to SMM.) Click to view the SMM metal industry chain database.