Increased Refinery Maintenance in May Supports Zinc Prices in the Short Term [Institutional Commentary]

Fundamentally, domestic zinc concentrate TCs have paused their rebound for three consecutive weeks. With zinc prices pulling back and the pressure of the off-season, refinery maintenance increased in May, and production is expected to decline MoM. On the demand side, the operating rate of galvanizing enterprises largely met expectations, showing a slight rebound, while the operating rates of die-casting zinc alloy and zinc oxide enterprises both declined, falling short of expectations. In the short term, tariffs continue to impact some export orders, and some end-users are about to enter the traditional off-season. With downstream sectors relatively pessimistic about the future market, they are focusing on consuming raw material inventories and maintaining just-in-time procurement. However, we remain relatively optimistic about the performance of domestic demand in the future. Amid escalating overseas risks, domestic stimulus policies such as "expanding domestic demand" are likely to be further intensified. On the inventory front, LME warrants saw a significant transfer to delivery warehouses of 78,525 mt last Wednesday, exceeding 190,000 mt, returning to levels seen in January this year. However, the market had largely anticipated this, while domestic inventories continued to destock, albeit at a slower pace. Overall, we believe the logic for SHFE zinc spreads remains more certain in the short term, and we continue to focus on spread opportunities. For unilateral strategies, it is recommended to take profits on short positions and avoid further exposure, while paying attention to the LPR window this Monday and the policy signals from the April Politburo meeting.