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    Shanghai Zinc still has a long allocation opportunity

    2019-03-14 04:12:57

    China Securities Journal Zhang Lijing

    Since this week, the main contract of Shanghai Zinc Futures has been three consecutive days, with a cumulative increase of 3.23% to 21,875 yuan / ton. The outer disk zinc also stood at a seven-month high. Analysts said that the decline in short-term inventory data and the suppression of imports have provided significant support for zinc prices. Whether the rebound can continue or not depends on the downstream demand situation. If demand is warming, zinc prices will receive phased support.

    Stock decline short-term bullish zinc price

    Recently, the inventory data released by SMM shows that the social stock of zinc city has begun to reverse, and the downward trend is obvious, which has become an important reason to support the recent strong zinc price.

    According to Chen Sijie, an analyst at Tianfeng Futures, “According to some of the situations we have learned before, the downstream finished goods inventory has dropped a lot, and the late probability of starting to replenish the warehouse. This explains why the market downstream goods are reduced after the Spring Festival holiday. The reason is because there is sufficient stock of finished goods before it can be used for buffering. On the other hand, the market still has some concerns about the macro aspect of this year, so it is more cautious."

    On the macro level, China's manufacturing PMI and import and export data performed poorly in February, and monetary and financial data also needed to be improved. "This aspect is affected by the Spring Festival holiday factors. On the other hand, it reflects that China's economic downward pressure is still relatively large, and the overall demand is weak. The current economic negatives bring pressure on the price of non-ferrous metals." Baocheng Futures related research analysis.

    From a fundamental point of view, the agency pointed out that on the supply side, global zinc mine production growth is a relatively certain event, which is also the foundation of the market to see long-term zinc prices in the air.

    Judging from the processing fee index for zinc mine output growth, the statistics of Baocheng Futures Research Institute show that the current average price of zinc mine processing fees in the southern region of China is 5,800 yuan / ton, up 2,845 yuan / ton from the beginning of 2018, an increase of 78%. The average processing price of zinc ore in the northern region was 6,350 yuan / ton, up 2,850 yuan / ton from the beginning of 2018, an increase of 79%. The average processing price of imported zinc mines was US$240/ton, up by US$225/ton from the beginning of 2018, an increase of 12 times.

    “In the past year, zinc ore processing fees have increased by a large margin, which has improved the profits of smelters to a certain extent, and the smelters have potential to increase production kinetic energy. In order to alleviate the downward pressure on the economy, the environmental protection limit in 2019 may be marginal relaxation. In addition, the increase in zinc ore production is gradually transmitted to the zinc ingot chain, and zinc ingot production may rebound.” Baocheng Futures Research pointed out that from mid-February to early March 2019, imported zinc was in a state of loss, and short-term import zinc inflow was suppressed, but In the medium and long term, affected by the increase in overseas zinc market supply, the amount of zinc imported from China will continue to increase in 2019.

    Pay attention to the situation of downstream rehabilitation

    On the demand side, according to market participants, the enthusiasm for downstream galvanizing, zinc oxide and die-cast zinc alloy enterprises in the January-February period was not high, and the spot market was lightly traded. After entering March, the phenomenon of zinc ingot inventory accumulation was obvious. As of the beginning of March, the zinc inventory of the previous period and the domestic inventories of domestic zinc ingots were 117,000 tons and 235,500 tons, respectively, up 97,000 tons and 136,000 tons respectively compared with the stocks at the end of last year. LME zinc stocks were 59,800 tons, which continued to decline. According to Baocheng Futures Research, the current overseas zinc inventory is still at a relatively low level in history, which is 90% lower than the historical inventory.

    “It will take a long time for the policy to warm up and the economy will improve. If the terminal demand fails to improve significantly in the second quarter, the zinc market will enter the stage of weak demand and inventory, which will limit the rebound of zinc price. At present, it needs attention. Downstream galvanizing, zinc oxide, die-casting zinc alloy enterprises resumed work. If the return to work in March and April is better than expected, then zinc prices will also receive phased support." The agency analyzed.

    "According to the recent situation of some of the major domestic manufacturers that we have learned, the capacity that was previously released due to various factors is likely to continue to be suppressed before June. In combination with overseas stocks, the price of zinc ingots is likely to be low. In the short term, it will continue to rise." Chen Sijie said that from the logical judgment, he still insists that the terminal demand for this year is generally good, and the demand may be late but will not be absent.

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    Editor in charge: Fu Jianqing RF13564

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