China to Maintain Net Export of Refined Zinc in May

SHANGHAI, May 24 (SMM) - According to the latest customs data released by the General Administration of Customs, in April 2022, China’s refined zinc imports were 1,500 mt down 92.8% month-on-month and 96.23% year-on-year. The cumulative import of refined zinc from January to April was 43,400 mt, a year-on-year drop of 75.09%. The exports stood at 4,200 mt, and the net exports were 2,600 mt. The top 4 supply countries in April were South Korea ( 29.7%), Japan (27%), Myanmar (17.3%), and Thailand (11.9%).

The SHFE/LME zinc price ratio fell below 6.3, expanding import losses to above 5,500 yuan/mt. Some countries shipped zinc ingots to Europe and the US where premiums were high. As a result, China reported low import volume in April.

 The US Fed decided to raise interest rates by 50 basis points in its May meeting, and will officially start to shrink its balance sheet from June 1. Russia-Ukraine war and tightening US monetary policy sent base metals prices down.  The focus of market attention shifted from tight supply to pessimistic expectations for future economy and consumption. European smelters are beginning to suffer losses as a result of high electricity prices and lower zinc prices, discouraging them from resuming or increasing production. As such, overseas supply will remain tight. Entering May, decline in LME zinc inventory has slowed down. LME cash-to-three-month backwardation declined. LME zinc inventory may grow if overseas consumption weakens. Inquiries for imported zinc ore improved after import losses turned into profits, but smelters still focuses on ore that will be delivered in Q3. TCs of imported zinc ore remain high. However, imported zinc ore is not enough to ease domestic shortages. Domestic refined zinc output is estimated at 513,000 mt. although logistics has gradually recovered from the pandemic, end demand remains weak.    

Recently, refined zinc import losses have expanded to more than 4,000 yuan/mt. Import volume is expected to remain low in May, while exports will grow amid an open export window. As such, China will maintain net export of refined zinc.