Tianjin Zinc Ingot Spot Premiums/Discounts Continue to Show Weakness, How Will They Perform Next? [SMM Analysis]

SMM September 12 News: After the environmental protection vehicle and production restrictions ended, premiums and discounts in the Tianjin area remained low, and the Tianjin zinc ingot market performed sluggishly. How will premiums and discounts move going forward?

From the supply side, smelters of major brands in Tianjin maintained good production conditions in August, benefiting from sufficient raw materials and high sulfuric acid prices, which boosted production enthusiasm. Some new production lines continued to increase output, leading to a continuous rise in Tianjin's zinc ingot inventory. Entering September, although some smelters began routine maintenance, and the total zinc ingot production in north China slightly decreased compared to August, overall production remained high. In September, Tianjin's zinc ingot inventory is expected to stay at elevated levels, with ample spot supply curbing the increase in premiums and discounts.

From the consumption side, zinc downstream in the Tianjin area is mainly concentrated in galvanising enterprises. From late August to early September, zinc ingot consumption demand declined significantly due to the implementation of the environmental protection-driven production restriction policy. After production resumptions, performance fell short of market expectations, with overall downstream demand remaining weak and operating conditions less than ideal. In particular, ferrous metals prices continued to fluctuate at lows, leading to poor sales of galvanized pipes, which in turn affected the production enthusiasm of galvanized pipe factories, with the actual operating rate lower than expected. Considering the raw material stockpiling demand before the National Day holiday, galvanized pipe enterprises increased the proportion of long-term contracts in September. However, due to the weak consumption situation, the digestion of these long-term contracts was slower than expected, resulting in some accumulation of zinc ingot inventory at the factories. In terms of structural components, steel tower orders performed relatively well, but demand for products such as guardrails, light poles, and PV mounting brackets remained sluggish. Small enterprises, facing funding pressures and order uncertainties, tended to adopt a purchasing-as-needed strategy, reducing zinc ingot inventory. Overall, procurement demand in the Tianjin market showed no significant improvement, and zinc ingot demand weakened.

Overall, the Tianjin market remains in an oversupply situation, while SHFE zinc has shifted to a contango structure. Many smelters and traders have delivery plans, and a large number of warrants are expected to flow out after next Monday's delivery. However, consumption remains relatively sluggish, and although there is some expectation of pre-National Day restocking, it may underperform compared to the same period last year. Amid persistent oversupply, Tianjin premiums and discounts are expected to remain weak.