Zinc Slag Payables Continue to Rise, How Will They Move Next? [SMM Analysis]

According to SMM, the zinc slag payables continued to rise in September and October. What are the reasons behind this trend, and how will it evolve going forward?

SMM analysis identifies the following main reasons:
1. End-use consumption fell short of expectations. Galvanizing enterprises performed slightly better in September than in August, but overall operations did not meet expectations. Zinc slag production remained low, and ferrous metals prices were also in the doldrums. Order volumes were average, leading to low production enthusiasm among galvanizing enterprises. Intense competition pressure, poor corporate profits, and limited room for price concessions by galvanizing plants kept the coefficient relatively firm.

2. zinc price trends provided some support for zinc slag payables. Throughout the year, the oversupply situation remained unchanged, with zinc prices consistently trading at low levels. Coupled with weak consumption, zinc prices continued to pull back in September and October. Due to cost considerations, some galvanizing enterprises were reluctant to sell, waiting for a rebound in zinc prices before offloading their stocks. Meanwhile, other galvanizing enterprises refused to budge on prices when selling, keeping zinc slag payables persistently high.

3. In September, zinc oxide enterprises operated at a relatively high rate, leading to an increased demand for zinc slag. However, it is understood that due to the low operating rates of galvanizing enterprises and the high zinc slag payables, zinc slag has become difficult to procure. As a result, many zinc oxide enterprises have opted to purchase crude zinc for zinc oxide production, which has limited the increase in demand for zinc slag. Nevertheless, this is not enough to drive down the zinc slag payables.

Looking ahead, zinc prices are expected to move higher, but galvanizing plant operating rates remain subdued, and zinc slag supply remains tight. Meanwhile, zinc oxide operating rates may pull back. Based on current galvanizing enterprise operating rates and future expectations, there is little room for a reduction in zinc slag payables.