Zinc ingot export window is about to open amid zero tariffs and steadily falling SHFE/LME price ratio [SMM analysis]

SMM, September 26:

Since September this year, as the SHFE/LME price ratio kept falling, the import loss for zinc ingots widened from 2,000 yuan/mt to over 3,000 yuan/mt. Moreover, the export window for zinc ingots has not reopened since 2022, strengthening market expectations for zinc ingot exports. Given that zinc ingot exports are divided into two types: spot exports and export to delivery warehouses, and considering the distances for shipping to overseas market, SMM has launched two new export profit/loss data points for zinc ingots: export profit/loss (Southeast Asia delivery warehouses) and export profit/loss (spot market in Southeast Asia), for market reference.

From the perspective of Southeast Asia spot export profit/loss data, the spot export window for zinc ingots is about to open. So, what conditions need to be met to engage in zinc ingot export business? What’s the current export tariff rate? Is there potential for the export window to further expand? Will zinc ingot exports see a substantial increase?

First, basic information on zinc ingot exports is as follows:

I. Zinc ingot exports fall under the Ordinary Trade mode. The enterprise's business license must cover import and export operations, and an export license must be obtained before commencing export business.

II. Overseas business is generally settled in US dollars, with common payment methods including LC, TT, and DP. Relevant overseas accounts are required.

III. Regarding taxes and fees, domestic zinc ingots include 13% VAT. However, the export tax rebate for zinc ingots was canceled in 2008, meaning this tax burden must be borne by the exporter.

IV. Although the export tariff for #0 zinc ingots is 20%, the provisional tariff rate for 2025 is 0%.

Second, from the trader's perspective on export opportunities:

Basically, trader exports are divided into two forms: spot exports and export to delivery warehouses. Considering current overseas consumption and transportation distances, the optimal solution for spot exports is exporting to Southeast Asia. According to SMM calculations, based on Southeast Asia spot prices of $130-150/mt, the export loss for zinc ingots (Southeast Asia spot market) was over 400 yuan/mt as of September 23, 2025. Additionally, spot exports require traders to have an existing overseas customer base, which to some extent also limits the export volume for traders. For export to delivery warehouses, considering warehouse capacity and transportation distance, the preferred locations for delivery are Kaohsiung (Taiwan), Singapore, South Korea, etc. According to SMM calculations, even after including delivery subsidies, the export loss for zinc ingots (Southeast Asia delivery warehouse) was over 1,100 yuan/mt. Zinc ingot exports have not yet presented profit opportunities, and traders are still waiting for the export window to open.

Finally, from the smelter's perspective on export opportunities:

In terms of domestic delivery brands registered with the LME, the main registered brands include Shuangyan, Cishan, Huludao, Hongye, Silver, Yuguang, Chihong, Zijin, Qilin, Torch, Nanhua, and Dongling. Based on the current SHFE/LME price ratio and export profit/loss, simply exporting zinc ingots does not present any profit opportunity. However, importing ore from overseas currently results in a loss of about 2,000 yuan/mt. The low SHFE/LME zinc price ratio somewhat restricts the inflow of imported ore, but domestic smelters' reliance on imported ore has gradually increased to nearly 40%, indicating a high dependency.

Smelters purchase imported ore either through directly locking in prices on the futures market or deferred price lock-in. At current prices, both methods basically result in losses. Against this backdrop, the export window is nearing opening, and smelters have two possible operational approaches:

For hedged positions on imported ore whose prices have already been locked in:

1. Hold a short position on LME. If LME prices rise → futures incur losses, LME outperforms SHFE continues, SHFE/LME zinc price ratio remains low → export zinc ingots to delivery warehouses → losses narrow.

2. Hold a short position on LME. If LME prices fall → futures bring profit, SHFE/LME zinc price ratio shifts upward → losses of zinc ingot export widen, sell zinc ingots domestically → normal hedging profit.

For imported ore whose prices have not already been locked in:

1. If LME prices rise →imported ore incurs losses, LME outperforms SHFE, SHFE/LME price ratio declines → export zinc ingots to delivery warehouses → domestic market outperforms overseas market, SHFE/LME ratio rises → overall losses narrow or even turn into profit (Note: zinc ingot export volume must be sufficient enough to restore the SHFE/LME ratio).

2. If LME prices rise →imported ore incurs losses, LME outperforms SHFE, SHFE/LME ratio declines → export zinc ingots to delivery warehouses → LME outperforms SHFE continues, SHFE/LME ratio falls → overall losses intensify.

Simply put, the core dilemma for smelters currently is how to reverse the losses they suffer on the LME or how to make deliveries overseas to offset losses. This corresponds to either selling high on futures to take profits or selecting appropriate points for export to delivery warehouses to achieve a moderate SHFE/LME ratio recovery that can cover some losses. For subsequent export volumes, it is advised to monitor market circulation and inventory levels.

Overall, neither spot cargo export nor export to delivery warehouse has presented profit room, with both traders and smelters awaiting opportunities for the export window to open. October coincides with the National Day and Mid-Autumn Festival holidays in China. Against the backdrop of low LME zinc inventory overseas, the backwardation structure persists. If LME prices spike, there may be phased opportunities for zinc ingot exports, and it is advisable to maintain flexible contingency plans.

Data Source Statement: Data other than publicly available information is processed by SMM based on public information, market communication, and SMM's internal database model, and is for reference only, not constituting decision-making advice.