Secondary Zinc Oxide Payables Show a Downward Trend, How Will They Perform in January? [SMM Analysis]

In December, the production of secondary zinc oxide declined, with the payables slightly decreasing in some regions by the end of the month. What is the trend for secondary zinc oxide in January?

Supply Side: In December, the increase in raw material supply from electric furnace dust failed to offset the reduction in blast furnace dust, coupled with maintenance at some secondary zinc oxide enterprises, leading to a continued contraction in secondary zinc oxide production. Although the rebound in zinc prices stimulated enterprises' willingness to sell, increasing the availability of goods in the market, the improvement in import conditions did not drive an increase in secondary zinc oxide imports, and the tight raw material supply persisted. Entering January, as the Chinese New Year approaches, some enterprises are expected to undergo maintenance and halt operations. However, with zinc prices fluctuating at highs, a strong willingness to sell is likely to be maintained. It is anticipated that market circulation will further rise, but overall production will continue to show a downward trend.

On the demand side, secondary zinc oxide serves as a key raw material for zinc ingot, zinc calcine, and zinc oxide, providing significant long-term demand support. However, current high prices have put downstream enterprises under profit pressure. In December, secondary zinc producers implemented production cuts and maintenance due to cost pressures, leading to a marginal weakening in demand, though this was partially offset by growth in zinc sulfate demand. With increased market supply, quality differentiation has intensified: prices of low-quality secondary zinc oxide are under pressure and declining, while high-quality resources remain relatively firm. As the Chinese New Year holiday approaches in January, downstream enterprises are experiencing a pullback in operating rates, resulting in seasonal demand contraction. Coupled with ample circulating supply, secondary zinc oxide prices are expected to continue their downward trend.

Comprehensive Outlook:
Amid weak supply and demand in January, the secondary zinc oxide market should focus on the price divergence between high- and low-quality resources, as well as the impact of zinc price fluctuations on enterprises’ sales pace.