ShreeMetalPrices: Macro and Supply Pressure Force SHFE ZINC To Drop Below 24000 Yuan/MT


Metals prices were pressured by the US Dollar Index, which rose to a 20-year high. Against this backdrop, LME and SHFE zinc prices fell, with LME zinc falling 6.24% overnight, a new low since July 29th. SHFE also recorded an overnight loss of 3.82 below the 24,000 yuan/mt mark. SHFE zinc continued its downtrend yesterday evening, falling 3.01% by midday to close at 23,875 yuan per ton. In the spot market, the spot price of zinc ingot fell to  an average of 24,460 yuan/mt to 24,410-24,510, down 3.05% or 770 yuan/mt in a single day.

Basically, the supply side is influenced by factors such as the faster than expected gas shorting in Europe and the European consideration of decoupling natural gas from the electricity market and  natural gas prices in Europe have fallen from above. After the foundry cost decline, attention should be paid to the production dynamics of overseas foundries. If costs continue to fall, smelters that stopped production early can resume production. In China, as the hot weather cooled, the effects of electricity rationing in Sichuan and Hunan provinces were eliminated, and businesses that closed due to electricity shortages essentially returned to  normal operations .The supply of refined zinc has gradually recovered.

According to the experts research, due to factors such as power cuts and maintenance works in August, domestic production of refined zinc  is expected to be 471,000 tons, which is lower than the original estimate. of month. Production is likely to recover to 530,000 tones when power is restored and ore supply increases. which experienced higher operating rates. The consumer sector has  yet to show signs of significant improvement even though zinc prices have eased. However, the market is still eagerly awaiting the issuance of special bonds and the launch of projects in September. In connection with the end of  hot and rainy weather and  abundant liquidity, the actual improvement in consumption is observed. Therefore, zinc prices are generally under downward pressure from the dual pressures from the macro and supply side. Going forward, zinc prices will be strongly supported if the consumption situation improves significantly and   inventories continue to fall. But  lack of market confidence and the impact of the pandemic outbreak will weigh on zinc prices, which are likely to fall below  support.