Zinc price in February
According to the commodity market analysis system, as of February 28th, the zinc price was 24438 yuan/ton, a decrease of 5.19% from the zinc price of 25776 yuan/ton on February 1st.
The zinc market has experienced a turning point from a “good start” to a “high resistance”. Due to the impact of the Spring Festival holiday, there has been an imbalance of strong supply and weak demand throughout the month, with a significant shift in the price center compared to January. At the beginning of the month, zinc prices continued to fluctuate from a strong high in January; Entering holiday mode in mid month, trading stagnates; After the holiday, there was a sharp contrast between stable production on the supply side and slow recovery on the demand side. Social inventory quickly accumulated to recent highs, suppressing the potential for price rebound.
In terms of raw materials
The zinc raw material market is currently showing a trend of tight supply and continuously low processing fees, which has built a solid bottom support for zinc prices. The processing fee for zinc concentrate remains at a low operating level. This week, the mainstream processing fee for domestic zinc concentrate fluctuated within the range of 1200-1500 yuan/metal ton. The processing fee for imported minerals is also fluctuating at a low level, with the mainstream market price ranging from $20 to $40 per dry ton. This price level is at a relatively low level in the past three years, fully reflecting that the pattern of tight supply in the mining sector has not changed.
Supply and demand side
On the supply side, there is a trend of stable quantity and increasing inventory, with accumulated inventory becoming the core factor in suppressing prices. Specifically, the production at the smelting end remained stable. During the Spring Festival holiday, mainstream zinc smelting enterprises in China maintained shift operations, and the overall operating rate only slightly declined. Large refineries maintained an operating rate of over 75% with the support of long-term supply and by-product income, while small and medium-sized refineries faced profit pressure but have not yet experienced large-scale production cuts; After the holiday, with the resumption of logistics and personnel returning to work, the production of the smelting plant quickly returned to normal levels. At the same time, social inventory accumulated beyond expectations, becoming the most significant feature of the supply side in February. As of February, the total social inventory of zinc ingots exceeded 200000 tons. The weekly inventory data from the previous period showed that zinc inventory increased by 23972 tons this week.
On the demand side, the pace of downstream resumption of work is significantly slower than the same period in previous years. The resumption of production by downstream galvanizing enterprises is mostly concentrated around February 24th; This makes it difficult for the demand side to form an effective demand pull effect. The differentiation trend in segmented fields is extremely significant. Galvanized enterprises have suffered from the dual impact of environmental restrictions and shrinking orders in the north, resulting in a significant decline in operating rates compared to the same period last year; Die casting zinc alloy enterprises have taken early holidays, resulting in a significant extension of inventory turnover days; The zinc oxide industry has been dragged down by the decline in operating rates of tire factories, resulting in a decrease in production compared to the previous period. However, the amount of zinc used in the new energy sector increased by 18% year-on-year, but this increase has not yet formed an effective demand hedge.
Spot trading remains sluggish. The resumption of work after the holiday did not meet the expected goals, and coupled with some companies completing phased replenishment of inventory in the first week after the holiday, the purchasing willingness quickly cooled down, and the market spot transactions remained sluggish. The downstream market mainly adopts the strategy of buying on demand at low prices. Recently, zinc prices have fallen slightly, but downstream procurement is still relatively light.
Future forecast
In February, the zinc market operated under pressure in a pattern of strong supply and weak demand, and the price center shifted significantly downwards compared to January. The contradiction between stable production on the supply side and slow recovery on the demand side is ultimately reflected through the rapid accumulation of inventory. The traditional consumption peak season in March is approaching, and the market is expected to have a direction choice – if downstream resumption of work accelerates as scheduled, coupled with smooth inventory clearance, zinc prices are expected to experience a temporary recovery trend; On the contrary, if demand remains weak, inventory pressure will continue to suppress prices.
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