The price of zinc reappeared after a consecutive increase.

Since the end of June, zinc prices have risen for three consecutive weeks. The zinc market has changed from the weak trend in June, and wants to hit the peak of the year again. However, in July, China’s State Reserve Bureau’s two dumping of zinc reserves re-stabilized the spot price of the zinc market and fell for two consecutive weeks. The overall dumping of reserves invested two basins of cold water on the hot zinc market in an attempt to extinguish the rising momentum of the zinc market.

Zinc price trend in July

In July, the zinc market was stimulated by the news of national reserve dumping, and the increase in zinc prices slowed down, but the overall zinc price still fluctuated slightly. As of July 31, the zinc price was 22736.67 yuan/ton, an increase of 0.92% from the 22,530 yuan zinc price on July 1. The price of zinc fluctuated up in July, but the news of the dumping of reserves delayed the zinc market's upward momentum.

China Manufacturing Purchasing Managers Index

According to data released by the National Bureau of Statistics of China, in July, China’s Manufacturing Purchasing Managers’ Index (PMI) was 50.4%, 0.5 percentage points lower than the previous month, and continued to be above the threshold. The overall manufacturing industry continued to expand, but at a steady pace. Slowed down. In July, some enterprises intensively entered the equipment maintenance period. Coupled with the impact of extreme weather such as high temperature and flood disasters in some areas, the expansion of the manufacturing industry weakened compared with the previous month, but the PMI of most industries remained within the boom range. In the manufacturing industry, demand in the zinc market is still high, but growth is slowing. The overall zinc market is still supporting the rise, but the rising momentum of the zinc market has weakened.

The price of electricity is rising, and the power limit will be upgraded again

After entering July, electricity consumption in high-temperature weather has continued to rise across the country. With continuous high temperature, the electricity load in various places keeps hitting new highs. Many places across the country have started to trial seasonal peak electricity prices and demand response electricity price policies. Anhui, Jiangsu and other places have implemented seasonal peak electricity prices; industrial power rationing has begun across the country, and Yunnan Province has begun to require some local metal producers to reduce power consumption for the second time within three months. Some zinc and tin smelters in Yunnan have received notices requesting a 25% reduction in power consumption. Many companies in Inner Mongolia, Ningxia and other places have restricted or even stopped production, and domestic power restrictions have been upgraded. The escalation of electricity curtailment once again led to a decline in zinc production and an increase in zinc smelting costs, which significantly supported the rise in zinc prices.

The National Reserve has twice dumped reserves to stabilize zinc prices

Following the release of 30,000 tons of national zinc reserves on July 5, the State Reserve Bureau of China announced on July 21 the second batch of national reserves of zinc: 50,000 tons. The two dumping of reserves will supplement social stocks. The zinc market With increasing supply, the downward pressure on zinc prices has increased.

Outlook

Affected by the dumping of reserves by the State Reserve in July, the rise in the zinc market was curbed, and the price of zinc rose slowly. However, Europe and China have encountered floods since the second half of the year, which tested the stability of the zinc supply chain. In the absence of major macro systemic risks, the zinc market still has strong support. Generally speaking, the zinc market in the future market will gradually enter the off-season, and the support of zinc ingot rise will weaken and the downward pressure will increase. However, the high cost of zinc smelting and extreme weather will have a short-term impact on the supply chain of the zinc market. The zinc market is expected to fluctuate slightly. With the landing of the national zinc reserve, zinc prices may fluctuate slightly.

Related listed companies: Zhongjin Lingnan (000060), Chihong Zinc Germanium (600497).

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