On April 29, the U.S. dollar index operated weakly, and the decline extended overnight, closing down 0.41%. In the context of the weakening of the US dollar, the metal collective of the internal and external disks overnight was red, and the rise in internal and external zinc prices was "leading", London zinc closed up 3.6% overnight, and once hit a stage high of 2956 US dollars in the intraday, and the opening of this morning also rose considerably, once rushed to 2974 US dollars / ton, a new high since March 2023, as of about 15:12 on April 30, London zinc rose 0.07% to 2945.5 US dollars / ton.
Shanghai zinc also rose strongly overnight driven by the weak performance of the US dollar and overseas London zinc, and it still did not change its rally today, rising to 23,715 yuan/ton intraday, a new high since February 2023. As of the close of the day, Shanghai zinc rose 2.84% to 26,515 yuan / ton.
In terms of spot prices, according to the SMM spot quotation, the spot price of SMM0# zinc ingot today has also risen remarkably. It rose 630 yuan/ton in a single day, and the price rose to 23330~23430 yuan/ton, with an average price of 23380 yuan/ton.
As for the reason for the rise in zinc prices, SMM believes that it is mainly driven by the influx of funds under the weak performance of the US dollar. In addition, the Political Bureau of the Central Committee of the Communist Party of China held a meeting on April 30, which conveyed multiple good news about real estate and consumer goods trade-in, which also drove the end of zinc prices. The fundamentals of the zinc market have also provided a boost to zinc prices. Let's take a closer look at the fundamentals:
First of all, the supply side continues to be tight to support zinc prices, and the news of the production reduction of an overseas mine that was rumored in the market has recently been confirmed, helping to further rise in zinc overnight, and the shortage of domestic mines has not been alleviated for the time being. According to the SMM spot quotation, the domestic zinc concentrate processing fee fell by 500 yuan/metal ton to 3000~3400 yuan/metal ton in May, and the average price was reported at 3200 yuan/metal ton, further reflecting the expectation of tight supply at the long-term ore end.
And although there is a resumption of production in the northern mines of China in the near future, the actual transmission still needs to be carried out after mid-May. Judging from the current smelter start-up, in addition to the routine maintenance plan, the smelter has basically resumed normal production, and the start-up has been maintained at a high level, and the demand for zinc concentrate is large, so the short-term mine end continues to be tense, and SMM is initially expected to see relief in May, and the mine supply will be actually eased at the earliest or at the end of May or early June.
In addition, judging from the inventory data, between April 25 ~ April 29, the domestic zinc ingot inventory went to the warehouse twice, and as of April 29, the social inventory of zinc ingots in SMM seven places totaled 211,600 tons, compared with 9,300 tons of 220,900 tons on April 22. Some market participants believe that the inflection point of social inventory has appeared. However, the actual situation in the follow-up still needs to pay attention to the consumption performance in May.
However, last week, due to the approaching May Day holiday, some downstream enterprises increased the demand for storage due to the May Day holiday, which drove the operating rate of the three major downstream sectors of zinc to rise to varying degrees. This week is about to enter the May Day holiday, SMM also for the downstream of some enterprises over the holiday to carry out a survey, including galvanizing enterprises, according to SMM research understands, some enterprises during the May Day holiday 2-5 days, some enterprises choose to May Day holiday normal production, a total of about 2305 tons of zinc consumption.
In terms of galvanized sheet, according to SMM research, most enterprises maintain normal production during the May Day period, and only one manufacturer in the survey sample chose to heat preservation and stop production, with 5 days of vacation, affecting zinc consumption of 164 tons, and the company chose to stop production due to poor orders and profits.
In terms of die-casting zinc alloy, according to SMM research, the average number of days of vacation in the May Day die-casting zinc alloy factory ranged from 0~5 days, and the average number of days of vacation was 3.6 days, an increase of 1.06 days compared with the average holiday of 2.54 days last year. There were 15 SMM die-casting zinc alloy enterprises during the May Day holiday, involving a total annual production capacity of 755,600 tons, affecting zinc consumption of 6,384 tons.
In terms of zinc oxide, under the influence of zinc oxide technology, it is not suitable for short-term shutdown, and most enterprises are similar to previous years, and do not make holiday arrangements to maintain normal production. There are 11 samples of zinc oxide enterprises on May Day holiday, involving an annual production capacity of 377,200 tons, of which only a few enterprises are on holiday due to production line maintenance and other reasons.
However, it should be noted that the pre-holiday zinc price broke through a new high, and the spot market transaction was generally poor. In the Shanghai zinc market, downstream enterprises purchase less, and some traders actively ship at high prices, but the willingness to ship at low prices is low under the support of delivery, and the overall transaction is weak;
On the whole, the current zinc price under the guidance of funds to rise fiercely, although the fundamentals are still supported, but at the same time, we must also be vigilant against macro risks, pay attention to the Federal Reserve interest rate meeting and non-agricultural data, and be vigilant against macro changes in the future. And during the May Day holiday, overseas base metals are operating normally, and the risk is high, so pay attention to the macro sentiment guidance and inventory changes after the holiday.
Institutional Reviews
Everbright Futures commented that as of this Monday (April 29), the total inventory of zinc ingots in SMM's seven regions was 211,600 tons, a decrease of 9,300 tons from April 22 and a decrease of 1,200 tons from April 25. The main force of Shanghai zinc rose 2.32% to 23,395 yuan / ton, and the zinc futures warehouse receipt was 75,926 tons, an increase of 1,882 tons from the previous day. LME zinc rose 3.26% to $2946.5 per ton. The zinc inventory is 255,400 tons, an increase of 950 tons of spot, overseas smelting has resumed but the demand recovery is slow, and it is expected that there will still be 1-20,000 zinc ingots in the Singapore warehouse. Domestically, although smelting has been reduced by the lack of raw material supply, the drag on zinc demand from sluggish real estate and infrastructure demand is also reflected. The internal and external fundamentals are weak, and the follow-up needs to be vigilant against the sharp decline in zinc prices after the market sentiment has retreated.
Zhengxin Futures said that driven by the external disk, zinc prices rose sharply overnight. From the perspective of medium and long-term fundamentals, the demand for zinc driven by the recovery of the global manufacturing industry is weaker than that of copper and aluminum, because of the difference in the downstream focus of copper, aluminum and zinc segments. The proportion of infrastructure and construction industry in the downstream consumption of zinc is significantly higher, the current domestic real estate is still bottoming out, the financial pressure of local governments, but also restricts the upper limit of infrastructure, overseas high interest rate environment, the service industry in developed economies is hot, but the real estate is still in the low tide, and the global zinc demand is still not significantly increased. On the supply side, under cost pressure, some high-cost mines overseas have reduced production, and the increase in global smelting capacity has made the shortage of raw materials even heavier, and TC and smelting profits have been squeezed to a low level, but starting in the third quarter, new zinc mine projects are expected to gradually contribute to production, and global zinc mineral output is expected to return to growth. On the whole, the growth rate of zinc forward demand is weak, and there are incremental projects on the way on the supply side, and the current oversupply situation is still difficult to reverse. It is expected that in the medium and long term, with the ebb of funds, the volatility of precious metals and non-ferrous metals will decrease, and the price of zinc will have a lot of downward pressure due to fundamental pressure. In the short term, driven by the breakthrough of copper prices, the shock is strong.