The coefficient of low-grade zinc oxide has first fallen and then risen since the first half of 2025. How will it perform in H2? [SMM Analysis]

SMM News on July 3:

In the first half of the year, the price of low-grade zinc oxide saw a slight decline in Q1, followed by consecutive increases in Q2. The demand for secondary zinc in the market also rose. How will the price of low-grade zinc oxide perform in the second half of the year?

In Q1, the demand from real estate and infrastructure projects was weak, and the downstream winter stockpiling situation was not ideal. Steel mills extended their Chinese New Year break, leading to a decrease in the overall supply of steel ash. However, in March, steel mill profits were moderate, and production willingness was high, with no reduction in steel ash production. But as the recycling capacity of steel mills increased, the zinc grade of steel ash decreased. Throughout Q1, there was a relative shortage of low-grade zinc oxide raw materials, but low-grade zinc oxide producers had some raw material inventory, allowing for normal production during the Chinese New Year break. Additionally, zinc prices remained at a relatively high level, and low-grade zinc oxide enterprises had a strong willingness to sell. Also affected by the holiday break, most secondary zinc producers had holiday arrangements and prepared raw materials in advance for production after the holiday. The tight ore situation at smelters was alleviated, and the demand for zinc oxide decreased, leading to a slight decline in the price of low-grade zinc oxide in Q1.

From the perspective of Q2, consumption showed strong resilience, and steel mill profits were in good condition, with high production enthusiasm. However, since April, the recycling and emission standards for steel ash have been raised, leading some steel mills to increase the use of rotary hearth furnaces to handle hazardous waste such as steel ash on their own. As a result, the market circulation of steel ash significantly decreased, raw material procurement became more difficult, and the market was in undersupply. Low-grade zinc oxide producers found it challenging to maintain a stable supply.

Some low-grade zinc oxide enterprises have been accumulating raw materials since the Chinese New Year break and only resumed production in May. Steel ash prices remained high, and zinc slag prices were also elevated. Some zinc oxide enterprises began to purchase crude zinc as an alternative raw material, leading to good sales in the crude zinc market. Against the backdrop of increased demand from secondary zinc enterprises, the price of low-grade zinc oxide was strongly supported. Despite a significant decline in zinc ingot prices in Q2, some low-grade zinc oxide enterprises still held back on sales, leading to a tight overall supply of low-grade zinc oxide in the market. Meanwhile, demand continued to increase, and the market coefficient of low-grade zinc oxide significantly improved in Q2.

From the perspective of market prospects, the shortage of raw materials may be difficult to alleviate in the short term. As the downstream enters the off-season, the supply of zinc slag is expected to decrease, while the demand for crude zinc from zinc oxide enterprises remains strong. In terms of secondary zinc, the demand for raw materials is still robust. However, with the rise in zinc prices, some low-grade zinc oxide enterprises have begun to sell off their inventory. If prices continue to climb, secondary zinc enterprises may find it difficult to bear the cost pressure. It is expected that the demand coefficient for low-grade zinc oxide will remain relatively stable in the second half of the year.

(The above information is based on market collection and comprehensive assessment by the SMM research team. The information provided herein is for reference only. This article does not constitute direct advice for investment research decisions. Customers should make cautious decisions and should not replace their independent judgment with this information. Any decisions made by customers are not related to SMM.)

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