SHANGHAI, Feb 20 (SMM) - Last week, the operating rates of domestic galvanising plants rose steadily following the launch of housing and infrastructure construction projects, along with the sales boom of galvanised zinc products, hence the enterprises were spared from inventory pressure.
In terms of demand, the anticipated zinc demand recovery was slightly better than the forecast. In terms of supply, the overall production of domestic zinc smelters was stable, but it was learned Henan Jinli mainly focused on the production of #1 zinc recently, which suggests that the output of zinc ingots in February will be slightly lower than the market expectations.
SMM also learned during our visit to Hunan last week that the electricity price in Hunan currently stood high. According to a secondary zinc plant in Luxi County, west Hunan, the local electricity price offered by China Southern Power Grid was raised to 0.81 yuan/kWh. In addition, the price coefficient of zinc slag in Henan and nearby provinces was quoted high due the scarce resources of high-quality scrap and zinc hypoxide. As a result, some secondary zinc enterprises barely made profits.
In fact, the domestic secondary zinc capacity is mostly distributed in the south-west part, where the power costs were elevated due to hydropower supply shortage. At present, the average monthly output of domestic secondary zinc is around 45,000 to 50,000 mt, and the production of secondary zinc enterprises shall draw continuous attention in the near term.
In terms of price, SMM believes that the thriving demand in the market will provide momentum for zinc prices. The zinc prices may find floor around 22,500-22,800 yuan/mt. In the overseas market, in view of the continuous deliveries to LME zinc warehouses, coupled with the recent pullback in European natural gas and electricity prices, there are growing expectations that the smelters overseas will resume production soon, which is another factor worth attention in the future.
SHFE zinc is expected to move within a range of 22,600-23,200 yuan/mt this week, while LME will range between $2,950-3,050/mt.
