Download Report

CHINA ZINC WEEKLY
Nov. 4, 2014｜No.183｜Published by SMM｜http:// www.metal.com｜11 Pages
Table of Contents
SMM Exclusive
Macro Economy ......................................P1
Monthly Output of Zinc in 2013 and 2014
SMM Focus.............................................P1
SMM Exclusive ......................................P3
Zinc Concentrate .....................................P4
Unit: 1,000mt
550
500
Spot Markets ...........................................P5
450
Relevant Markets ....................................P8
400
News .....................................................P10
350
300
250
1
2
3
4
5
2013
6
7
8
2014
9
10
11
12
Sources: CNIA, SMM
Zinc Market Data
10/24/2014
10/31/2014
LME 3-month Price* (USD/mt)
2256
2310
54
Ratio**
7.49
7.38
-0.11
SMM #0 Zinc Price (RMB/mt)
16900
16970
70
SHFE 3-month Price (RMB/mt)
16640
16880
240
Premium/Discount*** (RMB/mt)
SMM Inventory**** (kt)
TC***** (USD/mt)
Up/Down
205
140
-65
209.1
198.5
-10.6
190
190
0
Note: * refers to the closing price for LME 3-month zinc contract.
** refers to the ratio of SMM #0 zinc price to LME zinc cash price.
*** refers to the gap between spot price for #0 zinc in Shanghai and settlement price for SHFE spot-month zinc contract.
**** refers to total inventories in Shanghai, Guangdong, and Tianjin based on SMM statistics.
***** refers to the TC of imported zinc concentrate.
Highlights
Zinc Market
Contact us
Hotline:
+86-21-5155-0306
SHFE zinc prices underperformed LME zinc last week. SHFE 1501 zinc contract became
the most actively traded one early in the week, with prices surging to RMB 16,800/mt due
to a large number of bargain hunters.
SMM Focus
Mail:
service.en@smm.cn
Fax:
+86-21-5155-0345
Outdated Indirect Zinc Oxide Standard
East China’s Galvanizing Capacity Rises 25% in 2014
Zinc Oxide Sector to Reshuffle in 2015
Address:
23rd Floor, No. 2000 North Zhongshan
Road, Shanghai, 200063, China
Longli Zinc Oxide Wins China Top 10 Zinc Oxide Brands
www.metal.com
CHINA ZINC WEEKLY
Nov. 4, 2014
Macro Economy
Base Metal Prices Expected to Challenge Highs
The Federal Reserve announced the end to its asset purchase program following its October
policy meeting.
While some market observers believed that the Fed’s stimulus would push investors to favor
gold and to shift funds out of the US, 10-year Treasury note yields actually increased and gold
declined. The US dollar held stable against other major currencies until July this year, but has
climbed 7% since then. The rise in US equities has been all the more pronounced. The S&P 500
has soared 42.75%. All in all, the Fed’s bond buying program has yielded their desired results.
Headline unemployment has fallen to 5.9% from 8.1% in September 2012.
Nonetheless, several issues remain even with the end of QE. Bond market performance reflects
continually slow economic growth and Fed officials have warned that the strong dollar is a drag
on the economy. This has been compounded by the slowdown in the Chinese economy, and
waning demand in Germany that is further hindering recovery in the euro zone. Commodity
prices, including crude oil, base metals, and foodstuffs, have remained down for quite some
time, inhibiting growth in commodity export dependent economies such as Brazil, Russia, and
Chile. The further slip in commodity prices following the Fed’s ending of QE has prompted
some analysts, including major international institutions, to slash growth forecasts for emerging
economies.
One view holds that emerging markets will take a significant hit should the Fed hike interest rates
early. The Bank for International Settlements indicates that foreign investment made up 17% of
total investment in emerging market bonds by 2012, more than double its 8% share in 2007. This
surge of funds into emerging market bonds is more pronounced when seen against the backdrop
of an expansion in the bond market of emerging economies to over USD 16 trillion.
That being said, falling prices should help ease inflationary pressure in some emerging economies.
Other major economies, including Japan and those of the euro zone, are likely to push ahead with
accommodative measures.
Chinese Premier Li Keqiang emphasized the need to stabilize China’s housing market at the State
Council’s Standing Committee meeting October 29. Some local governments have relaxed home
buying restrictions the past few months. Although a wholesale move toward loosening is unlikely,
relaxation of financial and tax policies targeting the property sector, such as simplifying approvals
and raising the upper limit of housing provident fund loans, are expected. However, as the
government has already eased mortgage lending rules, any significant change in housing policy is
unlikely to be on the immediate horizon.
As the year begins drawing to a close, price negotiations on 2015 shipments are about to kick
off. Intensifying jockeying between buyers and sellers against technical supports may allow base
metal prices to challenge highs.
SMM Focus
Outdated Indirect Zinc Oxide Standard
The current Indirect Zinc Oxide Standard is obsolete, but an updated standard will not
be promulgated for another year. Shanghai’s Jinghua Chemical’s Chief Engineer, Wang
Ruiqiang, outlines where the current standard is out of date.
The current GB/T3185-92 Indirect Zinc Oxide Standard – has been in use over two decades
and was originally modeled on Japanese zinc oxide standards – has become outdated vis-àvis technical requirements and testing methods.
Copy Right © SMM Information & Technology Co., Ltd.
1
CHINA ZINC WEEKLY
Nov. 4, 2014
Zinc oxide is now used beyond coatings, rubber, pharmaceuticals, and chemical engineering,
having found use in electronics, cosmetics, feed supplements, voltage dependent resistors
and magnetic materials.
Documents cited in the outdated Standards, such as GB 9285 and GB 1715, have been
supplanted by GB/T 3186 and GB/T 5211.18.
Moreover, the number of secondary zinc sources tapped for raw material inputs in the
production of indirect zinc oxide has increased over the past few years.
The quality of domestically produced zinc oxide has improved. The 370 ppm lead content
in high-grade zinc oxide detailed in the current standard now exceeds heavy metal content
limits in Europe and the US. The content of other heavy metals, such as cadmium and iron,
should be increased, though.
East China’s Galvanizing Capacity Rises 25% in 2014
“The galvanizing market improved this year.” Said Jiangsu’s Guoqiang Zinc-Plating
Industrial Company’s Bid Invitation Officer Yuan Hao at the 2014 China Zinc Oxide Supply
& Demand Raw Material Price Conference sponsored by SMM.
He acknowledged strict environmental protection inspections in 2013 forced a large number
of galvanizers to suspend and turn to other products. The steel sector stepped up reshuffling
during 2014, but demand for galvanizing is still on the rise. However, the galvanizing market
is confronting challenges due to oversupply.
Yuanhao sees a downshift in the development of the galvanizing sector as oversupply, low
quality and concentration ratio remain into the near future.
He said the number of galvanizing production lines in east China grew 25% in 2014 to 40.
Some producers increased their capacity due to improving market.
Zinc Oxide Sector to Reshuffle in 2015
SMM understands that the bottlenecks for the zinc oxide sector are sluggish orders,
fierce price competition and losses. When combined with strict environmental protection
inspections, the zinc oxide sector will continue to reshuffle.
One zinc oxide producer in Hunan anticipates orders will decrease 30% YoY in 2014.
Many zinc oxide producers discounted goods against soft demand. This is all the more so for
producers of zinc oxide used in automobile rubber tires. In addition, most tire producers pay
by acceptance 60 days after taking delivery.
SMM sources report a large number of small producers have been forced to shut down
due to the environmental protection drive across China. Ongoing environmental protection
measures will push refiguring in the zinc oxide sector in 2015.
Longli Zinc Oxide Wins China Top 10 Zinc Oxide Brands
Shijiazhuang’s Longli Chemical Company was included in China top 10 zinc oxide
producers recently.
SMM interviewed Longli Chemical Company’s General Manager Zheng Guoqiang recently
and understands that the company – located in Gaoyi County, Shijiazhuang, Hebei - was
founded in 2002, covering 100,000m2. The company has total assets of RMB 160 million,
and annual output value is RMB 300 million. Major products are direct and indirect zinc
oxide.
Longli’s products are used beyond tire producers – most of which delay payments, having
found use in microcrystal, electronics, artwares (Rhinestone), ceramic and petroleum
catalyst. Especially microcrystal producers by in large use Longli zinc oxide for now.
Copy Right © SMM Information & Technology Co., Ltd.
2
CHINA ZINC WEEKLY
Nov. 4, 2014
Longli Chemical now has 40,000 mt of zinc oxide capacity – 22,000 mt of direct zinc oxide
and 18,000 mt of indirect zinc oxide – all of which have passed environmental protection
inspections. All the 6 direct zinc oxide and 7 indirect zinc oxide furnaces have reached full
operation.
Zheng Guoqiang believes zinc oxide producers should work to secure sustainable
development instead of discounting to sell. New environmental protection regulations to
be effective January 1, 2015 should force a large number of additional irregular producers
– including 1/5 indirect zinc oxide producers and even more direct zinc oxide producers to
close.
Direct zinc oxide technology requires more advanced equipment than indirect zinc oxide.
Longli Chemical put a direct Wetherill production line worth RMB 5-6 million and raw
material processing workshop worth 8-10 million into production, producing Zn 99%, Zn
99.5% and Zn 99.7%. Zheng Guoqiang said they may input RMB 4 million building an
indirect production line, but smaller companies only use cheap devices. Small producers
preferred to use indirect technology, which is heavy polluting.
He added that demand for zinc oxide in 2015 should underperform this year. Weakening
macroeconomy, sluggish property and automobile sectors will affect orders from ceramic
wall and floor tiles, bathroom accessory, coatings and tires.
The company also input RMB 50 million in technology innovation last year, rebuilding some
plants and making progress in automation.
SMM Exclusive
Output Analysis in September 2014
China Zinc Concentrate Output Up 4.6% in September
NBS data show domestic zinc concentrate output in September was 513,000 (zinc content),
its second highest this year, up 4.6% MoM but down 0.67% YoY.
Figure 1: Monthly Output of Zinc Concentrate in 2013 and 2014
Unit: 1,000mt
600
550
500
450
400
350
300
250
200
1
2
3
4
5
6
2013
7
8
2014
9
10
11
12
Sources: NBS, SMM
SMM attributes the MoM growth in September’s zinc concentrate output to the following
reasons.
Zinc prices remained high in September, giving incentive to mine production. SMM statistics
show the average SMM #1 zinc price in September was RMB 16,605/mt, down RMB 85/mt
from August. In addition, smelters built stocks for winter production. The most recent SMM
survey shows the average operating rate at domestic zinc smelters in September was 77.27%,
also the second highest for the year, compared to August’s 78.12%. Moreover, fewer rainy
weather in south China also helped increase zinc concentrate output. TCs for domestic zinc
Copy Right © SMM Information & Technology Co., Ltd.
3
CHINA ZINC WEEKLY
Nov. 4, 2014
concentrate (50%) rose RMB 50/mt (zinc content) in September on ample supply, to RMB
5,200-5,400/mt (zinc content).
Nonetheless, a large number of lead and zinc mines in Chifeng, Inner Mongolia cut or
suspended production in October due to adverse weather. There are also some mines in other
regions of the province halting production due to the same reason. Some mines in Qinghai
also have ceased operation. As the weather gets colder, more lead and zinc mines in north
China will cut or suspend production. SMM thus anticipates domestic zinc concentrate
output should fall in October.
China Zinc Output Grows 12.1% YoY in September
Data from the CNIA show China’s zinc output in September was 506,800 mt, up 12.1% YoY
and 4.23% MoM. YTD output through September was 4.19 million mt, up 4.6% YoY.
Zinc output grew across all major domestic producing regions. Output in Inner Mongolia
was 49,100 mt, up 13.52% MoM. Output in Hunan rose 1.9% MoM to 100,200 mt. Output
in Guangxi, Yunnan and Shaanxi was 43,000 mt, 91,300 mt and 76,000 mt, respectively, up
2.43%, 2.65% and 14.85% on the month. Conversely, output in Sichuan fell 17.83% MoM to
13,300 mt, and output in Qinghai was 3,000 mt, down 59.42% MoM, due to the suspension
of Western Mining.
The average operating rate at major domestic zinc smelters in September was 77.27%, down
0.85% MoM. Output at Chihong Zn & Ge slid nearly 10,000 mt due to the maintenance at
its Huize smelter; Hunan Sanli Group produced no zinc ingot after suspending production
in early September. SMM believes CNIA output data for Yunnan and Hunan were
overestimated. The average SMM #0 zinc price in September was RMB 16,665.71/mt, down
RMB 77.6/mt, but stayed at a high level. This led to high operating rates at zinc smelters, so
domestic zinc output remained stable in September.
SMM confirmed Yuguang Zinc Industry Company conducted maintenance in October, which
will affect its output 7,000 mt. But output at Chihong Zn & Ge will rise significantly due to
restart at its Huize smelter; Hunan Taifeng Mining Group resumed the other production line
in mid-October, and Shaanxi Zinc Industry Company ramped up production after completing
capacity expansion. As such, domestic zinc output should remain high in October.
Figure 2: Monthly Output of Zinc in 2013 and 2014
Unit: 1,000mt
550
500
450
400
350
300
250
1
2
3
4
5
2013
6
7
8
2014
9
10
11
12
Sources: CNIA; SMM
Zinc Concentrate
Table 1: TCs of Zinc Concentrate in Oct.- Nov. 2014
Domestic (RMB/mt)
Imported (USD/mt)
Oct. 2014
Nov. 2014
MoM Changes
5200-5400
5250-5400
25
180-200
185-205
5
Source: SMM
Note: 50% zinc content in both the imported and the domestic
Copy Right © SMM Information & Technology Co., Ltd.
4
Nov. 4, 2014
Figure 3: TCs of Domestic and Imported Zinc Concentrates since 2014
Unit: USD/mt
200
Unit: RMB/mt
5400
180
5300
160
5200
140
5100
5000
120
20
14
/2
/1
20 6
14
/3
/8
20
14
/3
/
20 28
14
/4
/1
20 7
14
/5
/7
20
14
/5
/
20 27
14
/6
/1
20 6
14
/7
/6
20
14
/7
/
20 26
14
/8
/1
20 5
14
/9
/4
20
14
/9
/2
20
4
14
/1
0
20 /14
14
/1
1/
3
TC of imported zinc concentrate
TC of domestic zinc concentrate
Source: SMM
TCs for domestic zinc concentrate rose RMB 25/mt (zinc content) last week, with TCs for
Zn 50% between RMB 5,250-5,450/mt (zinc content). TCs for imported zinc concentrate,
though, remained between USD 180-200/dmt.
TCs for zinc concentrate were stable last week, with RMB 5,250-5,400/mt (zinc content) for
Zn 50%. Price to factory at some large smelters was RMB 5,300/mt (zinc content). TCs for
imported zinc concentrate were mainly USD 180-200/dmt, or as high as USD 210/dmt.
The average SMM #1 zinc price rose RMB 168/mt in October. When coupled with stable
TCs, profit at mines was relatively high, inspiring production. But demand for zinc
concentrate remained steady due to high operating rates at smelters. Moreover, supply is
expected to decrease as a large number of mines in north China suspend production, and
smelters are building stocks for winter production. As such, TCs for zinc concentrates should
have little room to rise in the near term.
Spot Markets
Price Review
Figure 4: China and LME Zinc Prices in Recent Month
Unit: USD/mt
2,500
Unit: RMB/mt
17200
/3
0
/2
4
/1
0
14
/1
0
/1
8
14
14
/1
2
/1
0
/6
/1
0
14
/1
0
14
/9
/3
0
14
14
14
14
14
14
14
LME
/9
/2
4
16000
/9
/1
8
16240
2,100
/9
/1
2
16480
2,180
/9
/6
2,260
/8
/3
1
16720
/8
/2
5
16960
2,340
/8
/1
9
2,420
14
CHINA ZINC WEEKLY
Shanghai
Source: SMM
LME zinc prices strengthened on upbeat economic indicators last week. As the Fed will draw
QE3 to an end soon, base metals prices were weighed down. But LME zinc prices breached
the 20-day moving average as LME zinc inventories fell to a seven-week low, meeting
resistance at USD 2,300/mt. Trading volumes decreased 16,717 to 29,183 lots, and total
positions were down 6,539 to 292,000 lots.
SHFE zinc prices underperformed LME zinc last week. SHFE 1501 zinc contract became the
most actively traded one early in the week, with prices surging to RMB 16,800/mt due to a
large number of bargain hunters. Trading volumes increased 13,420 to 2.67 million lots, and
total positions were down 180 to 331,000 lots.
Copy Right © SMM Information & Technology Co., Ltd.
5
Nov. 4, 2014
China’s spot zinc prices weakened, with spot premiums of #0 zinc against SHFE 1412 zinc
contract prices narrowing from RMB 240-360/mt to RMB 180-280/mt last week. The price
spread between regular #0 zinc and Shuangyan and Yuguang widened from RMB 30/mt to
RMB 80/mt. The availability of #0 zinc from Shuangyan was highly restricted as the result of
equipment failure, leaving it to sell #1 zinc instead. Shipments from south China, combined
with smelters and traders liquidating inventories to raise cash at month’s end, increased the
supply of #0 zinc in Shanghai and widened the spread with Shuangyan and Yuguang. Traders
that see spot premiums falling watched on the sidelines. Downstream buyers replenished
stocks only as needed, muting transaction volumes.
Figure 5: Price Spread on #0 Zinc between Shanghai and Tianjin Over Past Three Months
/8
/2
9
14
/9
/3
14
/9
/9
14
/9
/1
14 2
/9
/1
14 7
/9
/2
14 2
/9
/2
14 5
/9
/3
14 0
/1
0/
14 10
/1
0/
14 15
/1
0/
14 20
/1
0/
14 23
/1
0/
14 28
/1
0/
31
/8
/2
6
14
14
14
/8
/2
1
Unit: RMB/mt
200
150
100
50
0
-50
-100
-150
-200
Source: SMM
#0 zinc prices in Tianjin were RMB 10-50/mt below Shanghai prices. Goods available
from smelters were stable. When combined with active selling by cargo holders, spot prices
proved resistant to increases. Traders mostly held back from purchasing. Downstream buyers
purchased as needed on month-end cash flow tightness, leaving overall trading quiet.
Figure 6: Price Spread on #0 Zinc between Shanghai and Guangdong Over Past Three
Months
/8
/2
14 1
/8
/2
14 6
/8
/2
9
14
/9
/3
14
/9
/9
14
/9
/1
14 2
/9
/1
14 7
/9
/2
14 2
/9
/2
14 5
/9
/3
14 0
/1
0/
14 10
/1
0/
14 15
/1
0/
14 20
/1
0/
14 23
/1
0/
14 28
/1
0/
31
Unit: RMB/mt
350
300
250
200
150
100
50
0
14
CHINA ZINC WEEKLY
Source: SMM
#0 zinc prices in Guangdong were RMB 170/mt below Shanghai prices. Product remained
readily available despite falling inventories thanks to the release of goods under warrants.
However, these released lots proved unpopular due to their production dates, so were priced
at discounts, undermining any gains in spot prices. Traders pushed for lower procurement
prices. Downstream buying was also weak due to tightening liquidity heading into month’s
end, keeping overall trading quiet.
Copy Right © SMM Information & Technology Co., Ltd.
6
CHINA ZINC WEEKLY
Nov. 4, 2014
Table 2: China's Spot Market # 0 zinc
Area
SMM 0#Zinc Price (Unit:RMB/mt)
14/10/24
SMM Inventory (Unit: 1,000mt)
14/10/31
Change
14/10/24
14/10/31
Change
Shanghai
16870-16930
16960-17040
100
156.9
151
-5.8
Guangdong
16710-16750
16800-16840
90
45.2
39.5
-5.7
Tianjing
16860-17700
16930-17770
70
7
8
1
Source: SMM
Inventory
Figure 7: Changes of Zinc Inventories in China
Unit: 1,000mt
450.00
400.00
350.00
300.00
250.00
200.00
31
2
14
/1
0/
/2
/9
14
14
/8
/1
8
4
14
/7
/1
/9
/6
5
14
14
/4
/2
1
/3
14
/2
/2
4
/1
/3
/1
14
14
13
/1
1/
29
150.00
Source:SMM
The latest SMM survey shows inventories in Shanghai, Tianjin and Guangdong fell a
collective 10,600 to 198,500 mt last week. Stocks in Shanghai fell for the fourth straight
week due to stable demand and modest shipments arriving from Guangdong, despite inflows
of imported zinc. Reserves in Guangdong fell further to hit a record low last seen May 2009
since a small inflow of imported zinc were not sufficient to offset outbound shipments to east
China. Inventories in Tianjin, however, grew slightly. Smelters sold actively at higher prices,
while supply from the producer of Zijin zinc decreased on falling output. Zinc consumption
was slow, though, as a large number of galvanizers will shut down due to the APEC meeting
to be held in early November.
Table 3: Prices at Major Chinese Smelters
SMM 0#Zinc Price
Region
Company
Northeast China
Liaoning Huludao Zinc Industry Company
Northwest China Hanzhong Zinc Industry Company
14/10/24 14/10/31 Change Remark
17700
Status Quo
17770
70 Ex-works price for #0 zinc
Normal Production
16925
17020
Traded price for #0 zinc in
95
Shanghai
Normal Production
South China
Shenzhen Zhongjin Lingnan Nonfemet
Company Limited
17100
17170
70
Traded price for #0 zinc in
Guangdong
Normal Production
Central China
Zhuye Torch Metals Company
17350
17450
100
Traded price for #0 zinc in
Shanghai
Normal Production
Southwest China Chihong Zn & Ge
17020
17260
240
Traded price for #0 zinc in
Shanghai
Normal Production
Central China
16910
17005
95
Traded price for #0 zinc in
Shanghai
Maintenance
completed
16730
16820
90
Traded price for #0 zinc in
Guangdong
Normal Production
Yuguang Zinc Industry Company
Southwest China Hechi Nanfang
Northwest China
Shaanxi Dongling Industry Trade Group
Company
16990
17120
130
Traded price for #0 zinc in
Shanghai
Normal Production
North China
Chifeng NFC Zinc Industry Company
16875
16930
55
Traded price for #0 zinc in
Tianjin
Normal Production
North China
Bayannur Zijin Nonferrous Metals
16885
16940
55
Traded price for #0 zinc in
Tianjin
Normal Production
Source: SMM
Copy Right © SMM Information & Technology Co., Ltd.
7
Nov. 4, 2014
Relevant Markets
Zinc Oxide Market
Zinc oxide prices stayed high last week with zinc prices, with RMB 16,600-17,000/mt for Zn
99.7%. Bearish zinc oxide producers are unwilling to purchase zinc ingot, but bought zinc
slag actively in advance of suspensions at galvanizers in November. Prices of zinc slag from
galvanized steel tower and tube/pipe producers are firm at RMB 14,000/mt (including tax).
Die-Cast Zinc Alloy Market
Figure 8: SMM Zamark3 & Zamark5 Prices Aug. 2013-Oct. 2014
Unit: RMB/mt
19000
17900
16800
15700
14600
Zamark3
/3
1
/1
0
/9
/3
0
14
/8
/3
1
14
/7
/3
1
14
/6
/3
0
14
/5
/3
1
14
/4
/3
0
14
/3
/3
1
14
/2
/2
8
14
14
/3
1
/1
/3
1
14
/3
0
/1
2
13
/3
1
/1
0
/1
1
13
/9
/3
0
13
13
13
/8
/3
1
13500
Zamark5
Source:SMM
Die-cast zinc alloy prices rose with zinc prices last week. The average price of Zamark #3
and Zamark #5 zinc alloy rose RMB 70/mt, to RMB 17,770-17,970/mt and RMB 18,07018,270/mt, respectively. Orders received were steady due to narrower zinc price volatility.
Die-cast zinc alloy producers purchased raw materials as needed on cash flow tightness and
market pessimism.
Galvanizing Market
Figure 9: Prices of Galvanized Plate/Coil, Cold-Rolled Coil & Hot-Rolled Coil Jul. 2013Oct. 2014
Unit: RMB/mt
5000
4800
4600
4400
4200
4000
3800
3600
3400
3200
3000
13
/7
/3
13 1
/8
/3
13 1
/9
/3
13 0
/1
0/
13 31
/1
1/
13 30
/1
2/
3
14 1
/1
/3
14 1
/2
/2
14 8
/3
/3
14 1
/4
/3
14 0
/5
/3
14 1
/6
/3
14 0
/7
/3
14 1
/8
/3
14 1
/9
/3
14 0
/1
0/
31
CHINA ZINC WEEKLY
HR (Q235/SS400 5.5mm*1500*C)
GI (ST02Z/SGCC 1.0mm*1000*C)
CR (SPCC/ST12 1.0mm*1250*2500)
Source:SMM
Galvanized plate and coil: Galvanized products prices stabilized at low levels last week,
with cargo holders selling actively due to month-end cash flow tightness. Trading in east
China was quiet as demand did not improve on month-end cash flow problem. In addition,
galvanized product prices face downward pressure. Demand in north China remained weak.
Guofeng I/S lowered hot galvanized SPHC plate/coil settlement prices in October, weighing
on galvanized prices at other private steel mills.
Copy Right © SMM Information & Technology Co., Ltd.
8
Nov. 4, 2014
Galvanized structural parts: The galvanized structural parts market remained stable at
low levels. Producers maintained steady production, but preferred to consume existing raw
material inventories. A large number of galvanizers in north China will be forced to close in
early November in favor of the APEC meeting.
Imports and Exports of Refined Zinc
The Shanghai/LME zinc price ratio averaged 7.43 last week, but fell from 7.48 to 7.38 on
weaker SHFE zinc prices, causing import losses to expand to RMB 710-480/mt. Import
premiums were USD 110-125/mt. Little imported zinc was available, despite a small
inflow of Japanese zinc, with mostly Belgian #0 zinc available from earlier shipments.
Spot premiums of AZC and Belgian #0 zinc narrowed from RMB 250/mt to RMB 200/mt
against SHFE 1412 zinc contract prices. The price spread with Shuangyan and Yuguang zinc
widening to RMB 100/mt.
Figure 10: Shanghai/LME Zinc Price Ratio and Import Profit/Losses
Unit: RMB/mt
1500
8.50
8.10
700
7.70
-100
7.30
-900
6.90
-1700
6.50
-2500
13
13 08-1
- 5
13 09-0
- 4
13 09-2
- 5
13 10-2
- 1
13 11-0
- 7
13 11-2
- 6
14 12-1
- 3
14 01-0
- 6
14 01-2
- 3
14 02-1
- 8
14 03-0
- 7
14 03-2
-0 6
14 4-1
- 5
14 05-0
- 9
14 05-2
- 9
14 06-1
- 8
14 07-0
- 7
14 07-2
- 4
14 08-1
- 2
14 09-0
- 1
14 09-1
- 9
14 10-1
-1 5
103
CHINA ZINC WEEKLY
Import Profit/Losses
Shanghai/London Zinc Price Ratio
Import Breakeven ratio
Source:SMM
Market Momentum
LME zinc prices breached USD 2,300/mt last week. With regard to zinc price trends, SMM
surveyed 30 market players and found that 36% are neutral, believing LME zinc prices will
move between USD 2,280-2,420/mt, and SHFE 1501 zinc contract prices will hover between
RMB 16,600-16,900/mt. The Fed announced it would draw QE3 to a close last week as
the US labor market is on the mend. When combined with the upbeat US Q3 growth, the
US dollar index surged to a new high since July 2010, which pushed down base metals.
But LME zinc prices rose last week in anticipation of zinc supply tightness in the future.
Nonetheless, LME zinc prices should be resistant to both increases and declines this week.
27% are bullish, believing LME zinc prices will rise to USD 2,350/mt, and SHFE 1501
zinc contract prices will test RMB 17,000/mt. October PMIs from many countries will be
released this week. China’s October PMI is expected to have improved further. The US PMI
looks promising due to the ongoing recovery there. US non-farm employment looks upbeat.
Moreover, the European Central Bank is expected to leave its benchmark rate unchanged, so
other major economic indicators are unlikely to deteriorate. Upbeat indicators should boost
market sentiment. LME zinc inventories in Guangdong, Tianjin and Shanghai continued to
fall. Guangdong’s inventories hit a five-year low, which will bolster zinc prices. In addition,
cash flow tightness will improve early November, so will inspire downstream purchase,
which will in turn support spot premiums.
Copy Right © SMM Information & Technology Co., Ltd.
9
CHINA ZINC WEEKLY
Nov. 4, 2014
Figure 11: SMM Survey of Zinc Price Outlook
Pessimism 37%
Neutral 36%
Optimism 27%
Source: SMM
The remaining 37% are bearish, seeing LME zinc prices falling to USD 2,270/mt, and SHFE
1501 zinc contract prices will drop to test RMB 16,550/mt. Smelters will sell actively at
RMB 17,000/mt, causing spot supply to increase and spot premiums to narrow further. In the
meantime, demand should weaken. Moreover, a large number of steel plants, galvanizers and
zinc oxide producers will be forced to shut down due to the opening of the APEC meeting,
which should constrain zinc consumption.
News
Boway Alloy Delays Zinc Alloy Project
Boway Alloy announced a postponement in the commissioning of its 18,000 mt/yr deformed
zinc alloy production line recently. The company said in the announcement the project will
come online in 2015.
Hunan Nonferrous Metals Suspends
Stock Trading
Hunan Nonferrous Metals announced share trading suspension for its Zhuzhou Smelter Group
due to upcoming privatization. Zhuzhou Smelter Group mainly engages in lead and zinc
products, and holds a 44.49% stake in Hunan Nonferrous Metals, with a 3.28% stake owned
by Hunan Nonferrous Metals. Both of the two companies are controlled by China Minmetals.
Zhuzhou Smelter Group incurred losses again in Q3. China Minmetals should reshuffle its
listed subsidiaries due to poor earnings.
Boliden’s Lead & Zinc Concentrate
Output Up Significantly in Q3
Boliden announced in its Q3 report that its zinc concentrate output was 77,167 mt, up 22% YoY
and 2% MoM. Output during the first three quarters totaled 215,986 mt, up 8% YoY. The sharp
growth in the company’s output is due mainly to rising output at its Boliden Area mine deposit.
Zinc concentrate output at the mine deposit was 12,918 mt, up 147.6% on the YoY basis, with
zinc grade also increasing.
Teck Resources Raises Zinc Concentrate
Output Target for 2014
Teck Resources announced October 29 it will restart production at the Pend Oreille zinc mine
in December 2014. It also raised zinc concentrate output target for 2014 to 615,000-63,000 mt
due to output growth at the Red Dog mine.
Copy Right © SMM Information & Technology Co., Ltd.
10
SMM also provides
SMM Regular Report (weekly & monthly)
Non-ferrous Metals Reports
China Base Metal Briefing
China Scrap Copper Weekly
China Copper Monthly
China Aluminum Industry Chain Weekly
China Aluminum Monthly
China Lead Weekly
China Zinc Weekly
China Nickel Monthly
China Silicon Metal Market Monthly new
China Manganese Monthly new
China Rare Earth Quarterly Report
SMM Annual Reports & Special Study
Non-ferrous Metals Reports
China Copper Industrial Chain Report 2012-2015
China Aluminum Raw Material and Supplementary Material Report 2012-2013
China Aluminum Industrial Chain Report 2012-2013
China Scrap Aluminum Industrial Chain Report 2012
China Lead Industrial Chain Report 2012-2013
China Secondary Lead Industrial Chain Report 2012
China Zinc Industrial Chain Report 2012-2013
China Nickel Industrial Chain Report 2012-2013
China Silicon Metal Industrial Chain Report 2012-2013
China EMM Industrial Chain Report 2012-2013
China Manganese Alloy Industrial Chain Report 2012-2013
SMM Research Team
Hotline: +86-21-5155-0306
Fax: +86-21-5155-0345
Email: service.en@smm.cn
Add: 23rd Floor, No. 2000 North Zhongshan Road, Shanghai, 200063, China
Web: http://www.metal.com
This report is an original work and/or a compilation by SMM, which holds the copyright thereto and is entitled to copyright protection under the Copyright Law of the People’s Republic of China and applicable
international treaties. Without the prior written permission of SMM, neither this report nor its contents, in part or in whole, may be reproduced, revised, sold, transferred, displayed, translated, compiled, or
otherwise disseminated.
The contents of this report, including, but not limited to, any and all information, articles, data, tables, charts, photographs, audio and/or video recordings, logos, advertisements, trademarks, trade names, domain
names, layout designs, are subject to protection under China’s Copyright, Trademark, and Unfair Competition laws, as well as applicable international treaties pertaining to the legal protection of copyrights,
trademarks, domain names, commercial data, and other forms of intellectual property, and are owned and held by SMM, its rights and assigns. Without the prior written permission of SMM, neither this report nor
its contents, in part or in whole, may be reproduced, revised, sold, transferred, displayed, translated, compiled, or otherwise disseminated.
The views expressed in this report are based on a comprehensive assessment of available market information by SMM Research as of the date of publication. This report is provided for reference only. Reliance on
the contents hereof is as your own risk.