Stable supply and low demand, with continued downward pressure on zinc prices in the future

Zinc prices plummeted significantly in May

According to the Commodity Market Analysis System of the Business Society, as of May 31, the zinc price was 19426 yuan/ton, a decrease of 9.11% compared to the zinc price of 21374 yuan/ton on May 1. In May, the spot zinc price fell below the 20000 yuan mark, setting a new historical low since March 2021.


China Manufacturing Purchasing Managers Index


According to data released by the National Bureau of Statistics, in May, the Purchasing Managers’ Index (PMI) of the manufacturing industry was 48.8%, a decrease of 0.4 percentage points from the previous month, below the critical point, and the level of manufacturing prosperity slightly declined. The level of China’s economic prosperity has declined, and the foundation for restoring development still needs to be consolidated. The recovery of the manufacturing industry has been poor, and the demand for zinc in the market has fallen short of expectations.


Low demand for zinc ingots during the off-season of consumption


According to the Commodity Market Analysis System of the Business Society, since April, the price of galvanized sheet has fluctuated and fallen, with low production levels for galvanized sheet and zinc oxide enterprises. The downstream consumption season of the zinc market is low, and the demand for zinc ingots is sluggish.


The domestic real estate market is weak


According to data released by the National Bureau of Statistics, from January to April, the national investment in real estate development reached 3551.4 billion yuan, a year-on-year decrease of 6.2%. From January to April, the construction area of real estate development enterprises’ houses was 7712.71 million square meters, a year-on-year decrease of 5.6%. The newly constructed area of houses is 312.2 million square meters, a decrease of 21.2%. The completed area of houses is 236.78 million square meters, an increase of 18.8%. In April, the real estate development prosperity index was 94.78. The real estate market is weak and the prosperity index is insufficient, and the demand for zinc ingots is less than expected, increasing the downward pressure on the zinc market.


Expected excess supply in the zinc market


From the trend chart of zinc concentrate processing fees, it can be seen that the decline in zinc concentrate processing fees slowed down in May, and there was a brief rebound in zinc concentrate processing fees. Zinc concentrate processing fees stopped falling, zinc smelting enterprises’ enthusiasm for starting operations increased, zinc ingot production is expected to increase, and zinc market supply is expected to increase.


Expectations of zinc surplus continue to expand

According to data analysis from CRU Group, demand for zinc will be relatively weak in the coming years, while zinc mining and refining production will continue to grow. In the next five years, global refined zinc production is expected to increase by 1.3 million tons, a year-on-year increase of 3.4%; Among them, there will be an increase of 800000 tons outside of China, and an increase of approximately 500000 tons in China. Due to the economic recovery in China and Europe, global refined zinc demand is expected to increase by 2.7% year-on-year this year, reversing the 4.1% decline in 2022, but the demand growth rate is slower than the supply growth. The surplus supply of zinc continues to expand, and it is predicted that the zinc price on the London Metal Exchange (LME) will decrease from $3442 per ton in 2022 to $3050 per ton in 2023, with a potential further decrease to $2525 in 2024 and $2000 in 2025. Expectations of excess supply in the zinc market have increased the pressure on zinc prices to decline.


Future Market Forecast

According to data analysts from Business Society, in terms of supply, zinc concentrate processing fees are stabilizing. At the same time, the impact of Yunnan power restrictions on zinc smelting enterprises is weakening, and the enthusiasm of zinc smelting manufacturers to start operations is increasing. The supply of zinc in the market is stable. In terms of demand, during the off-season in the galvanized sheet and zinc oxide markets, demand for zinc ingots is weak, PMI in domestic manufacturing has decreased, the real estate infrastructure market has weakened, and expectations for zinc market demand have weakened. International zinc market demand is weak, and the pressure on zinc price decline has increased. In the future, the supply of zinc in the market is stable and the demand is sluggish, with significant pressure on zinc ingots. It is expected that zinc prices will fluctuate and fall in the future.