On May 14, the base metal ushered in a general rise in a favorable macro atmosphere, and the main Shanghai zinc also rose one after another, reaching a maximum of 24,025 yuan/ton, a new high since February 2023. As of the close of the day, Shanghai zinc mainly rose 1.26% to 23,720 yuan / ton.
In terms of spot, according to the SMM spot quotation, the spot price of SMM0# zinc ingot rose by 230 yuan/ton in a single day, rising to 23530~23630 yuan/ton, and the average price was reported at 23580 yuan/ton.
As for the reasons for the rise in zinc prices, SMM believes that it is mainly driven by macro benefits and capital reasons. At the same time, the tight supply of zinc fundamental mines is also boosting zinc prices. Specifically:
On the macro front, on May 13, the Ministry of Finance issued the "2024 General Treasury Bonds and Ultra-long-term Special Treasury Bonds Issuance Related Arrangements", of which the ultra-long-term special treasury bonds involve maturities of 20 years, 30 years and 50 years, and decided to issue 30-year ultra-long-term special treasury bonds on May 17, 20-year ultra-long-term special treasury bonds on May 24, and 50-year ultra-long-term special treasury bonds on June 14.
In addition, recent domestic real estate policies have been frequent, Hangzhou has completely canceled the real estate purchase restriction policy, and according to the monitoring data of the China Index Research Institute, as of May 6, more than 50 cities across the country have expressed their support for housing "trade-in", including Shanghai, Shenzhen, etc. The resurgence of real estate support policies still supports zinc prices from a macro perspective.
Returning to zinc fundamentals, the tight supply of zinc ore has become the main logic supporting the rise in zinc prices in the near future. As domestic mines basically carry out seasonal shutdown operations at the end of the year or beginning of the year, and resume production in March ~ June, the supply of zinc ore in the first half of 2024 is relatively tight. In May, with the gradual resumption of production of some seasonally suspended mines in China, domestic mine production gradually increased, but there are still some mining companies that choose to resume production in May and June, and it still takes time for mines to restart to return to normal levels, so the domestic mine supply in May is still insufficient.
In terms of imports, the import volume of zinc concentrate from January to March this year was at a low level in the past three years, and the level of imported zinc concentrate was not high. In addition, the disturbance of overseas zinc ore also has a certain impact on the import of domestic zinc concentrate. Therefore, on the whole, the shortage of domestic mines in May has not changed, which continues to support zinc prices.
As of May 10, Zn50 domestic TC (week) has dropped to 3,100 yuan/metal ton, a record low.
In terms of smelting, although some smelters still stopped production due to the shortage of raw materials in May, due to the high prices of small metals such as gold, silver and copper in the mine, and the price of zinc rose one after another in April to a high level of more than 23,000 yuan/ton, making up for the losses of some smelters, SMM expects that the output of zinc ingots in May will increase by 26,800 tons compared with April, and the demand for ore by smelters will further increase in May.
However, in terms of inventory, according to SMM's latest inventory data, as of May 13, the social inventory of zinc ingots in SMM's seven regions totaled 214,600 tons, an increase of 1,700 tons from May 9. Among them, due to the high zinc price in Shanghai, the downstream is afraid of high prices and cautious mining, which contributed to the main increase in inventory.
It is worth mentioning that this week, there are many heavy data overseas, including the United States CPI, PPI, and the number of unemployment benefits in April, so it is necessary to pay attention to macro guidance and inventory changes in the future.