SMM February 17: in today's online zinc live conference hosted by SMM, Han Zhen, senior analyst of the SMM zinc industry, analyzed the fundamentals of zinc in the first quarter of 2022 and looked forward to the future trend of zinc prices. She said that at present, the main factors affecting zinc prices are the energy problems on the supply side and the actual recovery in downstream consumption. In addition, we need to pay attention to the macro news.
Domestic mineral supply is still tight in the first quarter of 2022.
SMM believes that domestic mines will continue to be tight in the first quarter. According to SMM's previous research and statistics, the output of SMM zinc concentrate in January was 275900 metal tons, down 41800 metal tons from the previous month. The comprehensive operating rate of zinc concentrate was 60.4%, 8.1% lower than the previous month, and 3.5% lower than the same period last year. It is expected that the output of SMM zinc concentrate will further drop to 262800 metal tons in February, with a comprehensive operating rate of 59.8%.
Domestic mines are tight, and processing fees have continued to decline since the fourth quarter of last year. At present, the profit of zinc concentrate after the year is more than 9000 yuan / metal ton. Processing fees remain low and miners' profits increase, but production is limited during the Spring Festival holiday and seasonal production cuts.
Zinc ore imports dropped 4.5% in 2021 compared with the same period last year. Focus on the delivery of long orders in the first quarter.
The zinc mine import window was completely closed in the second half of 2021, and superimposed smelters were less receptive to low-cost import processing fees. Zinc ore imports in December were 240200 tons, while the cumulative total of zinc ore imports in 2021 was only 3.648 million physical tons, down 4.5 percent from the same period last year.
There is a strong correlation between the import of zinc concentrate and the inventory of Lianyungang, mainly because Lianyungang is the main storage place of imported zinc concentrate. In addition to Lianyungang, Fangchenggang and Jinzhou Port are also the main storage places for imported zinc concentrates.
Zinc ore imports in the fourth quarter are mostly long orders in the early stage of the smelter, and the spot transaction is not good. By the end of January 2022, Lianyungang had 130000 tons of inventory, which was basically flat at the end of last year.
The processing fee of imported zinc concentrate rebounded at a low level and the import loss was repaired to about 1500-2000 yuan / ton.
According to SMM statistics, although the recent Hulun ratio is still low, but has been revised, zinc concentrate import loss repaired to about 1500-2000 yuan / ton.
The processing fees for imported zinc concentrates have increased slightly, mainly because the Hulun ratio is relatively low, and smelters are unwilling to accept imported mines under such circumstances. At the same time, due to the reduction of production by European refineries, overseas sources of goods have relatively increased, and traders have a strong willingness to ship goods, resulting in a small increase in import processing fees. At the same time, under the current import processing fees, refineries are still not interested in imported minerals.
It is worth mentioning that after 2000, due to the control of explosives in the domestic Winter Olympic Games, mining in Inner Mongolia was restricted. After that, processing fees in Inner Mongolia and Guangxi were slightly reduced, and the processing fees dropped to 3800 yuan per metal ton.
SMM counted the changes of domestic mineral production in 2022, and it is estimated that the domestic production is expected to increase by about 210000 tons in 2022.
The increase of refined zinc production in January is less than expected in February-March, or it may rebound at the bottom.
According to the research and statistics of SMM, the output of refined zinc in China in January 2022 was 517600 tons, which was less than expected. The contribution of small and medium-sized refineries in Hunan to the Spring Festival holiday was mainly reduced. Due to the suspension of production in some areas during the Spring Festival holiday in February, domestic refined zinc production is expected to decrease by 64600 tons to 453000 tons from the previous month; in March, production is expected to increase by 76000 tons to 529000 tons, an increase of 32100 tons over the same period last year.
At present, it is in the peak period of power consumption, with the rise in the price of raw coal, bone glue and other auxiliary materials, the current production cost of the smelter is about 6000 yuan / ton. Recently, after calculating the sulfuric acid income, the smelting profit is not particularly considerable.
Imports fall sharply in 2021 compared with the same period last year, and may continue to be low in the first quarter of 2022.
In terms of zinc import, in 2021, the refined zinc import window only opened sporadically in the first half of the year. When the import window was closed, there was only a long inflow in the second half of the year. The cumulative import volume of refined zinc in 2021 fell 20.12% compared with the same period last year.
In 2022, overseas consumption recovery led by the continuous removal of storage, domestic supply has been repaired, internal and external price ratio continues to be revised down, and the import loss of refined zinc is still more than 2000 yuan / ton.
Judging from the current situation at home and abroad, SMM predicts that it is difficult to open the import window in the first quarter of 2022. With the recovery of domestic consumption and the pressure of high inflation and interest rate hikes overseas, the import window is expected to open in the second to third quarter.
It is estimated that the output of refined zinc will reach 6.32 million tons in 2022.
According to SMM statistics, the new capacity of domestic zinc refining in 2022 is mainly concentrated in recycled zinc. The output of refined zinc is expected to reach 6.32 million tons in 2022.
It is estimated that there is a shortage of 32000 tons of refined zinc in China in March 2022.
SMM counted the balance sheet of China's refined zinc from January to March in 2022. Due to the Spring Festival in January and February, when the upstream smelters had less Spring Festival holidays and the downstream consumer enterprises basically had holidays, there was a situation of excess supply of zinc ingots. Coupled with the advance of the Spring Festival this year and the impact of the Winter Olympic Games, it is estimated that there will be a surplus of 92000 tons of zinc ingots in February, and the production of smelters will resume in March.
The Spring Festival holiday drags down the start of galvanizing and pays close attention to the actual process of resuming work and production in enterprises.
On the consumption side, the galvanized plate was affected by New Year's Day and the Spring Festival holiday this year, coupled with the epidemic in the north, enterprises had an early holiday and overall underemployment dropped sharply to 54.93%. SMM expects the operating rate of galvanized plate to continue to decline in February. In addition, according to customs statistics, the cumulative net export of galvanized sheet increased by more than 48% in 2021 compared with the same period last year, and the export contribution is expected to decline sharply in 2022 after the export tax rebate is cancelled.
The start-up of galvanizing enterprises was slightly delayed after 2000.
According to the latest research by SMM, galvanizing enterprises basically resume production this week, but taking into account the impact of environmental protection and the actual arrival of employees, the operating rate is generally on the low side, and the black price is weak recently, and the terminal also has a wait-and-see trend, underemployment under weak sales is expected to gradually rise next week with the lifting of environmental protection.
The start of die casting declined one month ahead of the Spring Festival compared with the same period last year, and it is expected that there is still room for decline in February
The Spring Festival holiday in 2022 was earlier than last year, and the operating rate of die-casting zinc alloy enterprises fell to 23.09% month-on-month in January, mainly due to New Year's Day and the Spring Festival holidays. This year, some enterprises have had a holiday one after another from mid-January, pre-festival die-casting zinc alloy enterprises have mainly returned funds, relatively cautious in receiving orders, and zinc prices are high, the willingness of terminal pre-festival stock is not high, and Guangdong's inventory also appears continuous accumulation.
The start-up rate of die-casting enterprises is delayed after the end of the year, and it is estimated that there is still room for a decline in the
After the Spring Festival holiday, a small number of enterprises began to go to work on February 8, but due to the lack of restrictions on the return of workers, the operating rate was relatively low. In addition, some enterprises said that they mainly digested the inventory of finished products in the early stage and did not actually resume production until after February 15. Judging from the current situation, due to the high zinc price, the market wait-and-see mood is relatively strong, and the large-scale start-up of terminal enterprises is also concentrated after 15 days, and the terminal demand is weak in the short term, and there is still no obvious demand increment. Accordingly, the alloy factory is also cautious in purchasing, and the start-up depends on the change of zinc price and the increase of demand.
High price of raw materials + epidemic situation + downward operating rate of zinc oxide in the Winter Olympic Games
Zinc oxide enterprises have started work one after another, most of them started on February 10, some of their equipment has not yet been overhauled, and production is expected to increase one after another next week. The related orders of the whole enterprise are mainly the backlog of orders before the year ago. Affected by the Winter Olympic Games, the terminal tire enterprises of the northern enterprises have not started yet. As a result, the start time of some northern enterprises is relatively later than that of the southern enterprises, and the overall performance of the number of new orders is general. According to SMM research, most enterprises do not have a long-term production scheduling plan, and the overall 2022 orders do not see bright performance at present, mainly stable.
Social inventory increased by 82200 tons in the week after the festival.
In terms of inventory, the accumulated stock of social inventory in the week after the festival was 82200 tons, a slight decline of 13000 tons compared with last year. As of February 14, the social inventory of SMM seven places was 254300 tons, which was basically in line with previous expectations. After zinc prices fell this week, there has been a small amount of purchasing replenishment sentiment downstream, the short-term need to pay attention to whether the actual replenishment of the inventory will lead to a decline in inventory. From a long-term point of view, the current downstream raw material inventory is generally low, with the arrival of centralized resumption of production, raw material inventory will force enterprises to have rigid demand for stock, thus we can see the occurrence of de-stocking.
Analysis of factors affecting Price
SMM believes that the main factors affecting zinc prices are as follows:
1. The problem of energy on the supply side. The electricity price in Europe remains high, while the production reduced by Trafigura and Glencore due to energy problems has not recovered for the time being. The spot of zinc ingots in Europe is still tight, and the spot rising water has been as high as 450-500 US dollars / ton. The pressure of electricity price on smelters is further increasing, and we still need to pay attention to the trends of European refineries in the future.
2. The actual change of domestic inventory. In the first quarter, SMM expects the supply side to remain tight, and consumption has become the main concern in the market. Die-casting, zinc oxide plate is not expected to be a big surprise this year, the main focus is in the galvanized plate. For example, the data on the scale of social financing hit a record high in January, and some large-scale projects such as galvanizing, including UHV and infrastructure construction, have made the market look forward to more consumption in the galvanized sector. At present, the market is relatively optimistic about major infrastructure and believes that consumption is expected, but according to SMM, it is unlikely that consumption will be advanced in the first quarter, mainly due to the environmental protection restrictions of the Winter Olympic Games, Paralympic Games, and the two sessions, which have had varying degrees of impact on production and terminal construction. In addition, some infrastructure investments are cyclical, and the final landing of the project is also under consideration. At present, most of the enterprises SMM knows that the consumption of galvanized plate should actually improve in April-May, the previous price rise has been overdrawn a better expectation, at present, the momentum of the rise is not enough, unless we see a higher-than-expected production reduction and the outbreak of demand.
