Price Trend

According to the monitoring data of business associations, zinc prices fluctuated and fell in July, making it difficult for zinc prices to show an upward trend. As of July 31, the price of zinc was 19696.67 yuan/ton, down 1.97% from 20276.67 yuan/ton at the beginning of the month, and 10.15% from the same period last year.

II. Market Trend Analysis

Domestic Zinc Production

In 2019, the production of zinc increased month by month, and the domestic zinc production increased significantly. The supply of zinc in China was gradually turned from insufficient supply to excess supply. As of June 2019, zinc production has increased by 2.3% year-on-year. The supply of zinc is excessive, and the price of zinc in the future is not optimistic.

High zinc processing cost

According to statistics, on July 31, the processing cost of domestic refined zinc was between 6,000-6,600 yuan/ton. In 2019, the processing cost of zinc was significantly higher. It stimulated zinc smelting enterprises to increase start-up, increased supply of zinc production may increase, and the risk of excess supply in the future will increase.

Downstream demand

A few days ago, Shanghai Yiju Real Estate Research Institute released the Inventory Report of 100 Cities in China in the first half of 2019 (hereinafter referred to as the “Report”). By the end of June, the total inventory of newly built commercial residential buildings in 100 cities monitored was 45.203 million square meters, an annular increase of 0.4%, an increase of 6.0% over the previous year. Baicheng’s inventory-to-sales ratio, i.e. the inventory depletion cycle, was 9.8 months, which was the same as that in May. Although real estate investment increased in the first half of the year, the total inventory of commercial housing remained high, the ring ratio increased year on year, and the future real estate market is not optimistic. In the third quarter, real estate demand for zinc is expected to decline, and zinc market in the future is negative.

In the automotive sector, the global automotive market is weak and sales have fallen sharply. Although there are various policies to stimulate automotive consumption, the effect is not obvious. Future automotive consumption is bearish, and the demand for zinc in the automotive industry has declined significantly.

As for household appliances, air-conditioning output increased significantly in the first five months of this year, but since the second quarter, rainwater in the whole country has been more than in previous years, hot weather has been pushed back, and air-conditioning sales have fallen short of expectations. Since April, domestic air-conditioning inventory has been at a high level, which limits the later production scheduling space. It is expected that the seasonal weakening of air conditioning production will be very significant after July. The output of refrigerators and washing machines is mainly stable and the increment is limited. The demand for zinc in the future household appliances market is bound to drop dramatically, affecting the rebound in zinc prices.

Import and export data

According to the data, from July 1, 2019 to June 30, 2020, the annual import quota of galvanized coils made in China by the EU was 527 164 tons. However, within a few days of July 1, the annual quota was exhausted. According to market sources, the number of hot-dip galvanized steel coils imported by European buyers from China for automobiles has exceeded the annual quota by about 30%. According to the relevant provisions of EU import safeguard measures, the subsequent import of over-quota galvanized rolls will have to pay 25% tariff. Affected by tariffs, the enthusiasm of over-quota European international purchasing of Chinese galvanized coils declined, the demand for galvanized coils declined in the future, and the demand for galvanized coils was negative in the future.

International policies and regulations

On June 28, 2019, Ukraine’s Interdepartmental International Trade Commission issued a bulletin, deciding to impose anti-dumping duties of 22.78% and 47.57% on galvanized sheets imported from China and Russia respectively for a period of five years. The levy of anti-dumping duty has a negative impact on the export of domestic galvanized sheets, and zinc market has a negative impact.

3. Prospects for the Future Market

Bai Jiaxin, an analyst at Business Agencies, believes that in China, zinc production is increasing month by month, zinc market is gradually changing from short supply to over demand, and zinc concentrate processing fees remain high, which further stimulates the production enthusiasm of zinc smelting enterprises and increases the situation of excess supply in zinc market. In terms of downstream demand, the trend of real estate in the third quarter looks at. In terms of household appliances, the summer will go, and the household appliances will change from peak season to off season. In the future, the demand of household appliances for zinc will decline, and the overall demand for zinc is not optimistic. Internationally, EU countries purchased large quantities of galvanized coils in July, which is good for the zinc market, but affected by tariffs, the overall future zinc market is bad; Ukraine imposed tariffs on galvanized sheets produced in China, affecting the export of galvanized sheets, affecting the demand of the zinc market. In summary, the supply of zinc in the future city is growing steadily, the demand of zinc is not good, and the shortfall is obvious. The supply and demand of zinc in China is gradually changing from short supply to over demand. Zinc prices in the future are not motivated enough, the pressure of decline is still there. It is expected that zinc prices will fluctuate and fall in the future, and the zinc market has not yet shown an upward trend.