SMM Analysis: China Refined Zinc Imports Declined In July, But May See A Limited Increase In August

According to the latest customs data, in July 2024, the import volume of refined zinc was 18,500 mt, down 16,500 mt or 47.17% MoM, and down 75.97% YoY. Cumulative imports of refined zinc from January to July were 240,500 mt, up 37.36% YoY. In July, refined zinc exports were 2,700 mt, and the net import of refined zinc was 15,700 mt.

The top three countries for refined zinc imports in July were Kazakhstan (8,500 mt, 46.04%), Australia (6,300 mt, 34.00%), and Iran (1,600 mt, 8.67%). However, the overall import volume decreased significantly MoM. The slightly lower-than-expected import volume in July was mainly due to the SHFE/LME price ratio correction at the end of July, enabling the import window. However, because domestic bonded zone inventories were high, most flows came from bonded zone stocks. Additionally, the actual import window was small, with contractual inflows dominating, while there were few spot orders of non-taxed brands, leading to a significant drop in overall import volume.

In August, domestic supply tightness remained unresolved, and zinc concentrate TCs continued to decline. Smelters' raw material inventories fell below 14 days, exacerbating production cuts due to raw material shortages. Production dropped to 489,600 mt in July and might decrease further in August. Although current consumption is in the off-season, the strong domestic supply-side support for zinc prices persists. Internationally, ongoing geopolitical disputes and underperforming economic data increased recession fears, leading to weaker LME zinc prices. Despite a recent easing of recession concerns, LME inventories remain high, putting pressure on LME zinc prices. Overall, with SHFE outperforming LME, the SHFE/LME price ratio improved slightly. The refined zinc import window in August is expected to open intermittently. Considering the significant decline in bonded zone inventory, domestic customs import volume might see a limited increase, estimated at around 25,000 mt.