TCs Remain Low: What is the Current Progress of Winter Stockpiling by Zinc Smelters? [SMM Analysis]

SMM, November 20: Due to the winter shutdown of some mines in northern China, many smelters in north China need to stockpile 1-2 months of zinc ore to ensure normal production before and after the Chinese New Year. This winter stockpiling typically occurs from October to December. However, this year, the mismatch between supply and demand for zinc ore has become prominent. In October, SMM recorded that the days of raw material inventories for domestic smelters were 16.6 days, significantly lower than last year's 24.3 days. Against this backdrop, what is the current progress of winter stockpiling by smelters in north China?

Firstly, the raw material constraints for domestic smelters persist. According to specific data, from January to October 2024, the cumulative YoY decline in domestic zinc ore production was 0.22%, and there was no significant increase in port inventories. In the absence of significant improvement in raw material supply, although smelters in Inner Mongolia, Shaanxi, and Gansu have seen their days of inventories recover to about one month, this raw material level is based on the current low operating rate of producers. If production increases subsequently, the winter stockpiling pressure on these smelters will persist. The raw material inventory levels of other smelters are generally around 10-15 days. Currently, the focus of raw material procurement for these smelters is to ensure normal production, and overall winter stockpiling has not made significant progress.

Additionally, TCs also affect the progress of winter stockpiling by smelters. As of November 15, the weekly average TC for domestic zinc concentrate recorded by SMM was 1,500 yuan/mt, and the weekly TC for imported zinc ore was -$40/dmt. The rebound of domestic zinc ore TC is difficult, and currently, the profit of smelters excluding sulphuric acid and by-products is about -2,000 yuan/mt. Severe losses have made some smelters less enthusiastic about winter stockpiling or even plan to abandon it, which has also dragged down the progress of winter stockpiling by domestic smelters.

In summary, the winter stockpiling behavior of many smelters in north China is still ongoing. In this extreme market situation this year, the overall progress is not as good as in previous years. Continuous attention is needed on the subsequent production operations of smelters and the inflow of imported ore.