Why Did Zinc Concentrate TCs Surge in January During the Regular Winter Mine Shutdown Season? [SMM Analysis]

SMM, January 4:

       As of January 3, SMM data showed that the weekly zinc concentrate TCs for domestic ore reached 1,950 yuan/mt, up 450 yuan/mt from November. Meanwhile, the TCs for imported zinc ore rebounded to nearly -$20/dmt. However, according to SMM's communication, December coincided with the traditional seasonal peak of production halts at some northern mines by year-end. Despite the decline in domestic zinc ore production, why did the TCs still rise significantly?

       From the supply perspective, due to the regular production halts during the winter season, domestic zinc ore production declined consecutively in November and December, leading to a significant reduction in domestic ore supply. However, since H2, China's zinc concentrate imports have increased significantly and remained at high levels in Q4, continuously supplementing the domestic market supply. Against this backdrop, inventories at major domestic zinc ore ports have also continued to grow, exceeding 300,000 mt in January.

       From the demand perspective, SMM data indicated that smelter production in Q4 was approximately 500,000 mt. Although it improved compared to Q3, it remained at a low level overall, with limited growth in demand for zinc concentrate raw materials. Additionally, according to SMM's communication, the raw material inventory of domestic smelters rebounded to around 27 days in December, reaching the typical level for the same period in previous years, significantly alleviating raw material pressure compared to before.

       Therefore, as the raw material pressure on smelters eased, coupled with the sustained high zinc prices in Q4, smelters were able to negotiate with mines to increase zinc concentrate TCs, resulting in a significant rise in domestic zinc concentrate TCs in January. Alongside the increase in domestic TCs, smelters showed low purchase willingness for imported zinc ore TCs, which also led to a noticeable rebound in imported zinc ore TCs.

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