Supply constraints at home and abroad superimposed smelting high cost zinc prices remain strong

2022-08-01 0 By

Mine end, domestic zinc supply due to the Winter Paralympic Games and the two sessions during the strengthening of environmental protection policies, some of the northern mine resumption time delay, later will gradually resume production.In addition, due to the outbreak of the epidemic in many places, although the supply side of zinc mine production is relatively stable, but the transport of raw materials has a great impact.Therefore, in the short term, the supply side of raw materials may continue to tighten the situation, it is expected that in April domestic zinc concentrate processing fees are still low operation.Demand for zinc ore from overseas has also fallen as high electricity prices in Europe have led some smelters to extend maintenance periods.However, the current geopolitical conflict between Russia and Ukraine is still uncertain, and many countries strengthen sanctions on Russia’s energy products, it is expected that the processing cost of imported zinc concentrate may continue to rise in the short term, but with the subsequent resumption of production of overseas smelters, zinc concentrate supply may be relatively tight.In terms of smelting, there have been frequent production accidents and maintenance events of zinc refineries in China recently, mainly due to the frequent occurrence of disease in various parts of The country and the restriction of zinc mine transportation. In addition, some refineries in Shaanxi carried out routine maintenance in advance, and some refineries in Huayuan, Hunan, resumed production, which is expected to decline slightly in March.Taking into account the refinery in Inner Mongolia to stop production for some reason, the refinery in Yunnan and other areas may be small overhaul and shaanxi refinery production delay, zinc ingot output is expected to be about 510,000 tons in April.In terms of profit, the refinery’s production profit stabilized in March, but considering the rising cost caused by the dual control of energy consumption reduction load, the refinery’s profitability is generally at present.Recently, Russia asked the European Union to pay for natural gas in rubles, which further pushed up the price of zinc. There is still a risk that Russia will cut off the supply of natural gas to Europe, so the current energy price in Europe is uncertain.As electricity prices continue to refresh the high, the proportion of electricity costs in zinc smelting costs rose to about 60%, the Profit loss of European smelters hit a new high.If the European energy crisis intensifies, the loss situation of European zinc ingot smelters will be difficult to change. It is not ruled out the possibility of cutting production again. It is expected that overseas supply will maintain a tight pattern, and production cost pressure will support zinc prices.In terms of demand, the downstream and terminal demand is poor due to the high price of zinc ingot and the impact of the epidemic. Moreover, due to the strict traffic control policies, logistics and transportation continue to be blocked.Among them, the transport of zinc oxide enterprises is greatly affected, the supply of goods in the spot market is not smooth, and the orders of terminal tire enterprises are reduced, and the enthusiasm of enterprises to start work is reduced. It is expected to maintain this situation in the short term.Due to the warm weather in the zinc market, the downstream site resumed work, and the terminal demand performed well. The demand for galvanized sheet and galvanized pipe was released to some extent. However, in the short term affected by the epidemic, the operating rate of north China and East China decreased slightly, among which the weekly operating rate of galvanized structural parts enterprises in North China decreased to 57.74%.The overall weekly operating rate of die-casting zinc alloy enterprises fell to 64.48%.The slow recovery of downstream consumption is mainly due to the high price of raw material zinc ingot, which is affected by high overseas energy prices.Although the domestic epidemic has slowed down the pace of consumption, considering that terminal infrastructure projects may be launched in the second quarter, the export window will open repeatedly under the low superimposed ratio, which may promote inventory destocking.Therefore, overseas, Russia and Ukraine international situation may lead to the continuation of the European energy crisis, the cost side continues to give zinc prices strong support.Domestic mining end and smelting supply continued to be limited to support the lower price, demand end of the resumption of production pace compared to last year, but terminal infrastructure may drive consumption in the second quarter, we need to pay attention to the impact of the epidemic on demand and transportation.In addition, as the subsequent terminal consumption of slow recovery, together with Shanghai compare value under low export window is opened, the domestic zinc ingot or would obviously, superposition of LME stocks due to the limited supply continues to decline, the global zinc ingot inventory will remain low, zinc prices in the short term is expected or swings between 27000-29000 yuan/ton, zinc prices or still have further upside potential,Zinc varieties are recommended to meet the idea of doing more treatment.This article is from Huatai Futures