SHANGHAI, Mar 27 (SMM) - Supply: Power rationing in Yunnan still persists as some enterprises in Wenshan have also received notices of power restriction, though the supply has not yet been affected. Given that the water levels at the upstream reservoir are now low with low rainfall in Yunnan, power rationing is likely to extend into the rainy season. In addition, the imports of zinc ore in January and February increased significantly year-on-year, which accelerated the decline in TCs for domestic and imported zinc concentrates. It is also reflected that primary zinc smelters are running at high capacity and are willing to restock. SMM thus believes that apart from the influence of power rationing in Yunnan and other routine maintenance, the operating rates of domestic zinc smelters will be high in the first half of this year.
Demand: The growth of ferrous metal apparent consumption slowed down last week, so did that of the operating rates at cement producers. The market players began to wonder whether the demand has peaked. Moreover, galvanising enterprises also reduced their operating rates from the previous week when faced with mounting inventory pressure against weaker ferrous metal prices. The orders received by die-casting companies were still mediocre, so their operating rates are unlikely to rise future.
The concentrated launch of infrastructure construction projects during February and March this year has boosted the terminal demand for zinc ingots, so the following demand may lack enough momentum. At the same time, downstream enterprises are keen on restocking against low zinc prices, pushing up their raw material inventory. As such, it is expected that it will be unnecessary for them to stockpile in the coming months.
SHFE zinc prices are estimated to fluctuate at 22,000-23,000 yuan/mt.
