Why are Tianjin zinc discounts continuing to rise? [SMM Analysis]

In July, spot premiums in Tianjin have continued to rise. What are the reasons? Will spot premiums continue to increase in the future? SMM analyzes the market situation as follows:

Supply side, according to SMM survey data, in July, the arrivals at Tianjin's mainstream brand warehouses slightly decreased. Together with the decline in zinc prices in July, downstream pricing transactions increased, leading to a significant destocking in Tianjin's social inventory. Zinc prices continued to hover at low levels, and it is expected that inventory may continue to decrease, providing support for spot discounts.

Consumption side, many downstream producers in Tianjin are pipe companies, significantly impacted by ferrous metals prices. Orders for galvanized pipes have decreased noticeably, and other infrastructure construction shows no improvement. Together with the entry into the off-season for consumption, frequent extreme weather such as high temperatures and heavy rainfall, the overall downstream operations in July showed a downward trend. Intense competition in processing fees among galvanizing plants has made downstream purchasing more cautious, with market transactions mostly for just-in-time procurement and a reduction in investment-type purchases. Downstream companies have reduced capital investment. However, zinc prices have fallen to levels more acceptable to downstream, and traders are holding firm on prices, leading to a rapid correction in premiums and discounts. If the supply-demand pattern remains unchanged, Tianjin's premiums and discounts may continue to rise in the future.