Q2 Coming to an End: Recent Consumption Review and Hidden Risks of Zinc Oxide [SMM Analysis]

SMM June 12 News:

       As Q2 is coming to an end, how has the overall consumption of zinc oxide been recently? This article will analyze the situation based on changes in operating rates and the demand performance of various downstream sectors.

       Firstly, data shows that the operating rates of zinc oxide enterprises in China in April and May were both lower than those in the same period last year. What are the reasons behind this? Below are the specifics for each sector.

I. Review of Zinc Oxide Consumption in Q2: Significant Differentiation Across Sectors

(1) Rubber-grade Zinc Oxide: Demand Under Pressure, Exports Hindered

       Recently, the dual pressures of high inventory levels and a slowdown in outflows from warehouses at terminal tyre factories have directly led to a significant decline in their purchase demand for zinc oxide. In addition, the continuous deterioration of the international trade environment has further exacerbated the weak demand: the reciprocal tariff policy implemented since April, the anti-dumping investigation initiated by the EU in May, coupled with tense international situations in some regions, have caused a sharp drop in orders for tyre export enterprises with the US and the Middle East as their main markets, thereby significantly weakening tyre factories' purchase willingness for zinc oxide. However, the demand for rubber-grade zinc oxide in the chemical industry has remained relatively stable, buffering the overall decline in demand to a certain extent.

(2) Ceramic-grade and Feed-grade Zinc Oxide: Better Demand Performance

       The ceramic-grade zinc oxide market shows a differentiated pattern: some enterprises report that demand this year is significantly better than that in the same period last year, while others believe that market demand has remained stable. The feed-grade zinc oxide market has also performed well. Recently, the severe outbreak of African swine fever overseas has provided certain support for China's pork exports, driving up the demand for feed-grade zinc oxide against the trend during the traditional off-season, exhibiting the characteristic of "stronger-than-usual off-season".

(3) Electronic-grade Zinc Oxide: Mixed Demand Performance

       In 2025, the State Grid Corporation of China's investment exceeded 650 billion yuan for the first time, and power infrastructure projects in North and Central China have accelerated, strongly supporting the demand for electronic-grade zinc oxide. However, the demand performance in the home appliance sector is not optimistic. Data shows that in April, the cumulative YoY changes in China's household refrigerators, household air conditioners, and household washing machines were -0.7%, 2.6%, and 7.2%, respectively, which slightly slowed down the demand for electronic-grade zinc oxide used in varistors.

II. Risks and Outlook for Subsequent Zinc Oxide Demand: Cautious Sentiment Rising

(1) High Uncertainty in International Trade Risks

       The impacts of factors such as reciprocal tariffs, anti-dumping investigations, and geopolitical conflicts are unlikely to be effectively alleviated in the short term, which will continue to suppress the demand for zinc oxide from tyre export enterprises, thereby affecting the overall market performance.

(II) Combined Impact of Environmental Protection and Climate Factors

       In some regions, environmental protection checks have led to production restrictions and cuts in zinc oxide enterprises, limiting the release of capacity. Meanwhile, as summer approaches, high temperatures are expected to pose certain obstacles to the production of zinc oxide enterprises and some end-use demand, resulting in dual pressure on both supply and demand.

(III) Profit Compression and Market Pessimism

       Currently, the zinc oxide market is experiencing intense low-price competition, coupled with high raw material prices, continuously narrowing the profit margins of enterprises. Faced with the arrival of the off-season, most enterprises are cautious about future demand, expecting the overall operating rate of zinc oxide to continue its downward trend, and market activity to decrease accordingly.

     (The above information is based on market collection and comprehensive evaluation by the SMM research team. The information provided in this article is for reference only. This article does not constitute direct advice for investment research decisions. Clients should make cautious decisions and should not rely on this information to replace their own independent judgment. Any decisions made by clients are unrelated to SMM.)

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