What are the reasons for the recent price increase of low-grade zinc oxide? [SMM analysis]

SMM August 11th news: Recently, the coefficient of low-grade zinc oxide has continued to rise, reaching a relatively high level in recent years. What are the reasons behind the persistent high prices? What will be the trend in the future market?

From the raw material supply side, July marks the traditional off-season, with weak demand from real estate and infrastructure projects. Overall, steel mill orders have been average. Coupled with the impact of anti-"rat race" competition policies, some steel mills have reduced or suspended production, leading to a decrease in steel dust production. Additionally, the recycling capacity of steel mills has increased, resulting in a decline in the zinc grade of steel dust. This has made it more difficult to purchase raw materials, leading to an undersupply in the steel dust market and a rise in steel dust prices. As a result, low-grade zinc oxide manufacturers have struggled to maintain stable raw material inventories, with significant cost increases. The profitability of low-grade zinc oxide has been poor, prompting some low-grade zinc oxide enterprises to halt production and accumulate raw materials for future production. Raw material shortages and price increases have supported the rise in low-grade zinc oxide prices.

Demand side, according to SMM, after the Chinese New Year, zinc concentrate TCs continued to rise, and the supply of zinc ore gradually loosened. With sufficient raw materials at smelters, the demand for low-grade zinc oxide declined. However, due to the high price of zinc slag, some zinc oxide enterprises purchased crude zinc as raw material, and the overall sales of crude zinc were good. The demand for low-grade zinc oxide from secondary zinc enterprises increased. Additionally, due to strict customs inspections, the inflow of imported low-grade zinc oxide decreased, providing support for the price of low-grade zinc oxide.

Looking ahead, the shortage of raw materials cannot be alleviated, and the high cost of raw materials will support the price of low-grade zinc oxide. The market demand for low-grade zinc oxide remains strong, and it is expected that the price will remain high in the future.