Zinc Ingot Rallied in December: How Will It Perform in January? [SMM Analysis]

As of December 30, the most-traded SHFE zinc contract closed at 23,380 yuan/mt, rising by 955 yuan/mt for the month, a gain of 4.26%. Zinc prices climbed in December, hitting a low of 22,380 yuan/mt early in the month before rising steadily to a high of 23,730 yuan/mt mid-month, with the price center remaining elevated towards month-end. The price center for zinc in December was higher than in November. Entering January, with zinc concentrate TCs still at low levels without relief, will zinc prices continue to rise?

From a macro perspective, the US Fed cut interest rates by 25 basis points as expected at its December meeting. Domestically, the press conference on national economic performance released positive signals, with "anti-involution" remaining a key theme. The government's 15th Five-Year Plan outline proposed boosting new-type infrastructure and advancing major projects. The Ministry of Housing and Urban-Rural Development emphasized stabilizing the real estate market, creating an overall warm macro atmosphere.

On the supply side, according to SMM, China's refined zinc production in December decreased MoM to around 595,000 mt, reducing zinc ingot supply. Entering January, although domestic zinc concentrate TCs fell faster, the price ratio improved somewhat, leading smelters to purchase more imported ore. Some smelters resumed production, and SMM expects zinc ingot production in January to rebound slightly from December, with the pace of destocking expected to slow. Additionally, the export window for zinc ingots closed from mid-December, reducing exports, and is expected to remain closed in January, weakening support from the supply side.

On the demand side, as December began, some projects entered a year-end rush to meet deadlines, increasing end-user purchases and supporting some shipments. Zinc ingot demand remained resilient, though demand in the north weakened due to environmental protection measures, with operating rates for zinc oxide and galvanizing declining. Alloy performance held up. Entering January, approaching the year-end, northern demand gradually weakened due to weather, though some pre-holiday rush to deliver orders remained. Demand is expected to stay resilient, but domestic downstream zinc consumption is projected to weaken MoM compared to December, still exerting downward pressure on zinc prices.

Looking ahead to January, there is currently no clear guidance from the macro perspective. Considering increasing risks of weakening demand on the fundamentals side, coupled with rising zinc ingot supply and reduced support from the supply side, the price center for zinc ingots is expected to shift slightly downward in January. Continued attention is needed on macro sentiment and smelter production resumptions.