Spot zinc prices under pressure on sluggish demand

SHANGHAI, Mar 2 (SMM) – Spot zinc discounts in the Shanghai market continued to widen downwards over the past week on high inventories, slower consumption recovery and tighter cash, SMM learned.

Many smelters maintained normal operations during the Chinese New Year holiday last month and accumulated inventories. This gave pressure to the market and led traders to cut prices in order to offload their cargoes.

Downstream customers including galvanising and die-casting plants will only resume production until after the Lantern Festival on March 2. The Chinese People’s Political Consultative Conference (CPPCC) and the Chinese National People’s Congress (CNPC) to be held in the next couple of days will also limit production by galvanising plants in the northern part of the country.

This created a gap between supply and demand and exerted pressure on spot zinc prices.

In addition, cash liquidity presents an issue for downstream industries as the tax season on March 15 approached. Buyers are likely to keep procurement on a hand-to-mouth basis and limit any upward momentum for spot prices brought on by post-holiday demand recovery.

SMM expects SHFE zinc prices to trade under pressure with low spot premiums in the short term amid a weak physical market.  

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