SHANGHAI, Aug. 20 (SMM) - Spot premiums of #0 zinc in Guangdong against October delivery SHFE zinc contracts will fall given oversupply and anemic demand, SMM predicts.
Smelters in major zinc producing regions, including Yunnan, Guangxi, Guangdong and Hunan, maintained high output in July. Operating rates at smelters majorly servicing Guangdong averaged 71.7%. Meanwhile, large inflows of imported zinc also added to oversupply. There were also shipments arriving after delivery date.
Demand, on the other hand, is sluggish amid summer heat and off-season, especially in South China, SMM says. The average operating rate at die-cast zinc alloy producers was only 43% in July. Besides, exports shrank as international competitiveness weakened with rising labor cost.
Growing inventories in Guangdong will be another reason affecting spot zinc price there, which climbed to 54,000 tonnes in August, SMM added.
Spot premiums of #0 zinc in Guangdong against October delivery SHFE zinc contracts fell from 300 yuan to 100-200 yuan per tonne recently.
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