Increased output and weakening demand suppress the rebound of zinc prices

Since late mid-November, the industrial metal line has opened a prelude to significant adjustments, and zinc has also seen a wave of steep diving ahead of the end of October. Through analysis, it is found that this round of zinc price falls is also reasonable. In the previous June to October, zinc prices out of a wave of super "bubble" bull market, while the policy tightening in November led to the inevitable occurrence of zinc prices "crowded "Foam" value return process. The so-called “bubble” bull market is due to the global liquidity, and in October the Fed’s launch of QE2 has contributed to it. As a result, these "hard assets" such as zinc and other industrial metals have become the preferred investment for speculators to "maintain value and increase value." However, at a time when global speculative madness drove up asset prices and inflation soared, emerging economies such as China finally renewed their tightening tools with greater efforts, eventually leading to “roller coaster” adjustments in zinc prices.

Looking at the trend of zinc price in the later period, it is not optimistic. Both the supply and demand side and the capital side are difficult to give strong upward momentum to zinc prices in the next three months. The consumption of zinc will show a slowdown before March of next year. The tightening cycle in China is estimated to be at least six months or more. The biggest concern is that zinc production will rebound sharply after “energy saving and emission reduction”, which will intensify the zinc market. With excess pressure, it is estimated that the current Shanghai zinc rebound will face strong pressure in the range of 18,000-19,000 yuan/ton.

China’s policy tightening and price adjustments dampen speculative enthusiasm for funds At present, China’s credit control and liquidity management have encountered unprecedented difficulties, and inflation and abundant liquidity continue to force policies to tighten tightening. Some institutions currently forecast that the CPI in November may rise to 4.8% to 5%, and negative interest rates will increase. At the same time, the new ** in November may already be close to 600 billion yuan, and the new credits in the two weeks before November were even more than 400 billion yuan, plus a cumulative increase of 6.88 trillion yuan in the previous October. This means that The new ** in November was close to the 7.5 trillion red line. In addition, "hot money" is still continuing its ferocious influx.

The rumors of tightening policies and even raising interest rates are enthusiasm for suppressing speculative funds in the market. The relevant data show that the trading volume of Shanghai zinc fell sharply in mid-late-November, from 2.6 million hands to 1.3 million hands or so, and the positions were also from 500,000 hands. It dropped to about 400,000 hands.

U.S. data warming and debt crisis in Europe support the continued rebound of the US dollar As of now, the U.S. dollar has continued to rebound for almost a month. The Irish debt crisis has caused the market to worry about eurozone debt in Portugal and Spain, and risk aversion has caused the U.S. dollar to rebound sharply. On November 24th, Standard & Poor's downgraded Ireland's long-term rating. If the aid plan fails to prevent the capital outflow, the country’s rating will also be lowered, and the debt crisis will spread to Portugal and Spain. The hedging has resulted in the US dollar having a considerable rebound. power.
Recently, the economic data released by the United States has reassured investors about the prospects for economic growth in the United States. The annual growth rate of the US GDP in the third quarter has been revised up to 2.5%, and the initial value has increased by 2.0%. At the same time, the US manufacturing index and consumer confidence index are all picking up. The recovery of US economic data will help the dollar rebound. In addition, the geopolitics of the military exchanges between the DPRK and South Korea also led to the recovery of the US dollar.

“Energy conservation and emission reduction” is coming to an end. Zinc production rebound will exacerbate the excess pressure affected by “energy saving and emission reduction”. In October, refined zinc production in China fell 4.87% month-on-month to 480,000 tons. Zinc production also fell in October. 3.8%. At present, "energy-saving and emission reduction" is coming to an end, and for some places to sprint for "Eleventh Five-Year" energy-saving emission reduction targets to adopt power cuts, the National Development and Reform Commission has criticized and requested corrections, so that power cuts will improve in the market outlook , And many zinc smelting companies and mining companies will gradually resume production. And the power restriction is only affecting some small and medium-sized enterprises with excessive pollution. Most of the key front-line smelting companies have maintained a high operating rate. In November, domestic zinc and zinc production will rebound. Relevant data show that the operating rate of 41 key zinc smelting enterprises nationwide in October was 82.94%, continuing to maintain the upward trend since August.
Given zinc production rebound and the original inventory is high, the zinc market over the next three months will increase pressure. Through calculations, refined zinc production will increase by about 15% this year and will reach 6 million tons, while current Shanghai zinc stocks will remain at around 300,000 tons, and private recessive stocks will be around 600,000 tons, followed by imports of 50,000 to 60,000 tons. The conservative estimate will be around 800,000 tons surplus. Once the monthly production rebounds in the later period, the excess pressure in the zinc market will increase.

Downstream consumption has weakened, and companies are not actively preparing for goods at the end of the year. First, from the spot market, downstream companies in the first working day in December continued to adopt a wait-and-see attitude, and purchases were not positive. The cash discount was 500-600 yuan/t. According to the author's investigation last week in Yunnan, Gejiu, Jianshui and other lead-zinc mining and processing bases, it is found that lead-zinc companies generally have high stocks and shipping is not smooth. In the peak season before the financial crisis in 2008, only one Jianshui County accounted for 200-300 million yuan in lead and zinc transactions per day. However, the turnover is now in the order of tens of millions, and the shipment volume is less than 2,000 tons per day.
Second, the downstream zinc industry and other galvanized infrastructure construction are not optimistic about zinc demand. According to data released by the China Automotive Industry Association, auto production and sales fell by 3.3% and 1.2% respectively in October. It is expected that the overall automobile sales growth in China may slow down to 10% in 2011, and this year is expected to increase by 32%. Since sales of galvanized products, which account for 60% of domestic zinc consumption, have declined, the production and sales of coated plates fell by about 3% in October. In spite of the high output in September, the inventory has increased by 2%.

In summary, the current downstream demand has slowed down, especially as the auto industry has overdrawn the future consumption capacity, which has caused the sharp fall in automobile production and sales at the end of the year and 2011, which has plagued the market. As the “energy saving and emission reduction” draws to a close, the rebound in zinc production will intensify. The excess market pressure, while the mid-term rebound of the US dollar and China’s policy tightening are even more persistent negative pressures. The only good news is that the global economy is in the process of recovery. Therefore, although zinc prices are still supported by costs, there is not much room for rebound.