Zinc prices have risen continuously this week
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According to the Commodity Market Analysis System of Shengyishe, as of January 26th, the zinc price was 21426 yuan/ton, an increase of 2.63% compared to January 19th, when the zinc price was 20876 yuan/ton; Compared to January 1st, the zinc price of 21588 yuan/ton decreased by 0.75%. Macro positive factors combined with a decrease in inventory have led to a continuous increase in zinc prices this week.
Macro positive
Macroeconomic Regulation Helps Economic Recovery: The State Council has made it clear to increase the entry of medium and long-term funds into the market, and to focus on stabilizing the market and confidence! The Premier of the State Council emphasized the need to solidly carry out various tasks related to economic and social development this year. To better leverage the role of macroeconomic regulation, proactive fiscal policies should be moderately strengthened, improved in quality and efficiency, prudent monetary policies should be flexible, moderate, precise and effective, enhance the consistency of macroeconomic policy orientation, and effectively consolidate and enhance the positive trend of economic recovery. China has increased its macroeconomic regulation efforts to help the domestic economy recover, which is beneficial for the non-ferrous sector and has led to a rise in non-ferrous metals. Positive factors have stimulated a continuous increase in zinc prices this week.
Overseas macroeconomic benefits: Markit manufacturing PMI in the United States expanded in January, the US dollar index quickly fell, concerns about recession in the Eurozone eased, and manufacturing rebounded beyond expectations in January. The initial real GDP growth in the fourth quarter of the United States was 3.3% higher than expected, while the European economy rebounded beyond expectations. The macroeconomic situation was positive, providing support for the rise of the non-ferrous sector and increasing support for the rise in zinc prices.
Weakened supply
The processing fee for zinc concentrate has continued to decline, reaching a new low since October 2022; The tight supply situation at the mining end of the zinc market continues, and as the Spring Festival approaches, smelters are still in the stage of reserving raw materials in the first quarter, and their procurement is relatively active. The tight mining situation provides cost support for zinc prices. The profits of smelters are in an inverted state, and some smelters have experienced maintenance and production reduction. Expected decrease in zinc supply in the market.
Since January, LME zinc inventory has steadily decreased. On January 25th, LME zinc inventory decreased by 2100 tons, and LME zinc inventory reached a new low of 193475 tons in two months. This week, the inventory of Shanghai zinc in the Shanghai futures market decreased again. On January 26th, the inventory of Shanghai zinc in futures was 3821 tons, a decrease of 1354 tons this week. The total inventory of Shanghai zinc this week was 22647 tons, a slight increase of 45 tons. The overall LME zinc inventory and Shanghai zinc inventory are both at a low level, indicating insufficient supply in the zinc market.
Decreased demand
As the year-end approaches, downstream sectors have gradually entered a holiday period. Last week, the operating rate of galvanized sectors declined significantly, with a weekly operating rate decrease of 2.76%; Most die-casting zinc alloy companies will start reducing production lines and taking maintenance breaks in late January; Last week, the orders of various downstream sectors in the zinc oxide sector increased and decreased, and the overall operating rate remained weak. This week, as zinc oxide enterprises continued to holiday, the operating rate of enterprises continued to decline. As the Spring Festival approaches, downstream production has significantly declined, downstream consumption is weak, and zinc prices are bearish.
Future Market Forecast
According to data analysts from Business Society, there have been continuous macroeconomic benefits both domestically and internationally in recent times, and the expectation of economic recovery is accelerating. Coupled with weak supply and demand in the zinc market, the support for the recent rise in the zinc market is increasing. However, due to poor demand, the upward space for zinc prices is limited, and zinc prices may fluctuate and consolidate in the future.
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