Last week, zinc prices hit a new high since June 2022. From the perspective of fundamentals, the tight supply of ore has not yet improved. From January to April, the YoY decline in imported zinc concentrate was 23.6%. Additionally, the import window is unlikely to open in the short term, making it difficult for zinc concentrate imports to see a significant increase. Although domestic zinc concentrate production increased YoY from January to April, the increase was only 7,000 mt in metal content. The depletion of ore in the north limited the growth in zinc production. Raw material inventories at smelters are less than 20 days of production, and production at some smelters have already been affected by insufficient raw materials and low TCs. It is expected that smelters’ production may decrease in June. On the consumption side, domestic real estate policies have been favourable, and the "2024-2025 Energy Conservation and Carbon Reduction Action Plan" has also boosted sectors such as infrastructure, towers and automobiles. According to the operating rate and survey of galvanising sector, orders from steel tower and photovoltaics sectors in Jiangsu and Zhejiang have increased. These, together with the accelerated implementation of special bonds, will boost consumption even during the off-season. While inventory declined in the past two weeks, the drop was not significant.
The model predicts that the average price for SMM #0 zinc ingot will be [24,310, 25,755], with an average of 25,000. The unit is yuan/mt. The extreme price range is [23,700, 26,360], the normal price range is [24,110, 25,960], and the conservative price range is [24,510, 25,550]. Prices are expected to consolidate at highs this week. The support range is [24,110, 24,510], and the resistance range is [25,550, 25,960].
In summary, the overall logic of inflation and the prospects for domestic economic recovery remain unchanged, and fundamentals still support zinc price. It is recommended to go long on dips. Forecast for the most-traded SHFE zinc contract: 24,000-25,500 yuan/mt; LME zinc: $2,900-3,200/mt; spot discounts against the SHFE 2406 zinc contract: 100-50 yuan/mt.
