Zinc Oxide Operating Rate Edges Up in August: How Has the Market Performed Recently Amid High Zinc Prices?

SMM Sep 9 News:

According to SMM data, the operating rate of domestic zinc oxide enterprises in August stood at 45.07%, edging up 0.12 percentage points month-on-month while falling 2.65 percentage points year-on-year. The overall operating level saw a slight recovery yet remained weaker than the same period in previous years. In terms of end-user consumption structure, demand varied across downstream segments, showing a pattern of weak off-season performance with limited demand growth.

Tire Sector The tire industry is a major consumption field for zinc oxide. Domestic demand in August displayed typical off-season characteristics. Some tire manufacturers reported high inventory levels within the sector. Meanwhile, data from China Automobile Dealers Association (CADA) showed that China’s auto dealer inventory warning index came in at 62.3% in August, rising 5.3 percentage points year-on-year and 1.2 percentage points month-on-month. Staying above the 50% boom-bust line, the index signals heavy inventory pressure for finished vehicles. As a result, downstream shipments remained sluggish, and some tire producers implemented production cuts or suspensions. On the cost side, zinc prices trended higher across August. Zinc oxide manufacturers raised offers amid mounting cost pressure, but market demand failed to improve noticeably. Tire mills only purchased zinc oxide for rigid replenishment, offering limited support to zinc oxide consumption and capping price gains of zinc oxide products. Meanwhile, uncertainties mounted on the export front. On August 19, the Eurasian Economic Commission released the final disclosure for the sunset review on heavy-duty (all-steel) tires, proposing to maintain the existing anti-dumping duties for another five years, covering Russia, Kazakhstan, Belarus and other member states. Separately, according to the official notice released by the Canada Border Services Agency (CBSA) on August 31, Canada launched anti-dumping and countervailing investigations on Chinese truck and bus tires. CBSA is expected to release its preliminary ruling within 90 days.

Ceramic & Feed-Grade Zinc Oxide Sectors The ceramic sector has long been weighed down by the sluggish real estate market with poor demand in recent years. Coupled with rainy summer weather, the zinc oxide market entered its traditional off-season, with persistently weak supporting demand and scarce new orders. Demand stayed muted in August, and procurement of zinc oxide remained at rigid levels. For feed-grade zinc oxide, demand has been depressed by hog prices since H1 this year. Although hog prices edged higher in August, gains were modest. Breeders were reluctant to expand herds, and market feedback indicated some farms marketed piglets in advance, dragging down demand for feed-grade zinc oxide. That said, the Mid-Autumn Festival and National Day holidays fall at end-September. Following historical patterns, pre-holiday stocking activity is expected, which may lift demand for feed-grade zinc oxide.

Electronic-Grade Zinc Oxide Sector Electronic-grade zinc oxide posted relatively steady consumption. Supported by power grid investment, relevant end orders remained stable and backed production at some manufacturers. However, its overall market size is small, so it can only deliver limited boost to total sector demand.

Looking ahead to September, the operating rate of zinc oxide enterprises is projected to rise to around 47.96%, up 2.89 percentage points month-on-month. For one thing, enterprises that resumed production in late August are set to run at normal capacity in September. For another, previously idled producers plan to restart operations in September and are now undergoing equipment commissioning. Besides, September marks the traditional peak consumption season. Downstream end demand is expected to recover gradually and lend some support to consumption.