Zinc Price Center Shifted Lower in March; How Will It Perform in April? [SMM Analysis]

SMM News, March 31:

As of March 31, the most-traded SHFE zinc contract closed at 23,480 yuan/mt, up 1,230 yuan/mt for the month, with a decline of 4.98%. Zinc prices plunged in March, briefly climbing to a high of 24,955 yuan/mt at the beginning of the month and falling to a low of 22,350 yuan/mt in the middle of the month, with the overall price center moving down significantly. After zinc prices plunged in March, how will they move in April?

Macro. In March, overseas geopolitical conflicts continued to escalate, shipping through the Strait of Hormuz was disrupted, and the US Fed kept interest rates unchanged while delivering hawkish remarks. The market traded on economic stagflation and tightening liquidity, putting base metals under pressure. However, by month-end, geopolitical tensions showed signs of possible easing, and the market's extremely pessimistic sentiment somewhat improved, so the center of zinc prices is expected to rise.

Supply side. According to SMM, China zinc concentrate TCs remained low in March. At present, smelters' profits excluding sulphuric acid and by-products were still at a loss of around 2,000 yuan/mt, but prices of sulphuric acid and minor metal remained high amid ongoing geopolitical issues, leaving smelters with relatively good profits and strong production enthusiasm in March. In April, some smelters will conduct routine maintenance, and refined zinc production is expected to decline MoM, but overall China social inventory remains high, and zinc ingot supply is still loose.

Demand side. Starting in March, China zinc downstream enterprises gradually resumed work, but frequent environmental protection disruptions in northern China meant the overall pace of work resumption fell short of expectations. However, from the second half of the month, end-users gradually resumed work, and galvanizing, die-casting, zinc oxide and other sectors gradually began to reflect peak-season order characteristics, with social inventory entering a destocking pace in the latter part of the month. Looking at April, steel towers will begin a new round of tenders, power-related orders remain robust, and export orders still show resilience. Affected by the later Chinese New Year holiday, demand was somewhat delayed, and overall consumption expectations for April are relatively positive.

Looking ahead to April, as the peak season continues to materialize and demand gradually improves, China zinc ingot social inventory is expected to continue destocking. In addition, with frequent disruptions to outside China ore supply, fundamentals will provide stronger support for zinc prices. However, macro risks remain significant, and close attention should be paid to overseas geopolitical risks and other macro guidance.