Zinc Prices Face Upward Pressure, Caution Advised in Chasing Gains [Institutional Commentary]

In the domestic spot market yesterday, spot premiums continued to rise amid tight supply, with Shanghai reporting premiums of 250-270 against May contracts, and zinc ingot import profits further increased. Inventory-wise, LME warrants saw a significant transfer to delivery warehouses of 78,000 mt, pushing total inventory above 190,000 mt last Wednesday, which was largely anticipated by the market. Domestically, destocking continued, with social inventory dropping by 7,200 mt to 85,800 mt as of Thursday. Supply side, domestic zinc concentrate TCs have paused their rebound for three consecutive weeks. With zinc prices pulling back and off-season pressures, May refinery maintenance has increased, potentially reaching a scale of 50,000 mt. Additionally, the Antamina copper-zinc mine in Peru resumed operations yesterday after a suspension due to an accident. Demand side, the operating rate of galvanizing enterprises slightly rebounded, largely in line with expectations, while die-casting and zinc oxide operations pulled back, slightly below expectations. Short-term tariffs continue to impact some export orders, and some end-users are expected to enter the traditional off-season. With downstream sectors relatively pessimistic about the future, they are focusing on consuming raw material inventories and maintaining just-in-time procurement. Overall, we believe that the US-China tariff negotiations are unlikely to be resolved quickly, and short-term upward pressure on zinc prices remains strong, while the low inventory makes the SHFE zinc spread logic more certain.