Will the weak spot premiums and discounts in Tianjin zinc market improve in June? [SMM Analysis]

According to an SMM survey, the overall premiums and discounts in Tianjin showed a weak performance throughout the month. Can spot premiums and discounts rise in June?

From the supply side, the monthly production of mainstream zinc ingot brands in Tianjin is 113,000 tons. According to SMM survey data, production in April was 95,000 tons. Some smelters underwent maintenance in April, and production is expected to resume in May, with an estimated production of 99,000 tons. Overall zinc ingot production increased slightly compared to April. Warehouse arrivals were normal, and overall inventory levels were relatively high, inhibiting the spot market premiums and discounts in Tianjin. No maintenance and production reduction plans have been heard from smelters for June, so zinc ingot supply in Tianjin is expected to remain ample, continuing to inhibit premiums and discounts.

From the consumption side, in May, driven by non-ferrous metals, ferrous metals prices rose, and thus galvanized pipe orders increased. Steel tower orders remained stable. Other infrastructure projects showed no improvement. Due to increased raw material costs, overall downstream operating rates showed a downward trend. The high zinc price trend made downstream purchases more cautious, with most market transactions being just-in-time purchases. Days of raw material inventories decreased, and investment-type purchases decreased, reducing capital investment by downstream enterprises. SHFE zinc prices continued to rise in May. At the beginning of the month, due to post-holiday restocking and delivery factor, traders raised quotes, and premiums and discounts rose. However, as SHFE zinc prices gradually increased, traders lowered premiums and discounts to sell. Overall, the spot market consumption in May was weak, providing limited support for premiums and discounts.

Spot premiums and discounts showed a weak performance this year amid ample supply. If zinc prices continue to fluctuate at high levels in June, premiums and discounts may not improve significantly.