Following a recent sharp drop in zinc prices, the metal has quickly rebounded, driven by an overall commodity market recovery and reduced production at smelters—indicating that bullish forces in the market remain relatively strong. Bearish investors argue that Glencore is likely to resume operations at its idled mines, which will boost zinc supply and negate the previous shortage scenario; moreover, downstream demand has fallen short of expectations. However, zinc prices have now dropped to a low-profit zone, prompting more smelters to schedule maintenance, while consumption is expected to pick up. 3 Prices are expected to rebound moderately mid-month, with the decline in zinc prices likely to be limited. In the future, zinc prices may recover as demand picks up.

　　Long-term contract negotiations lower processing fees.

　　Due to significant disagreements between the two sides, the annual processing fee negotiation meeting failed to reach an agreement. However, zinc mining companies clearly gained the upper hand in this round of negotiations, reflecting the currently tight supply situation in the zinc ore market.

　　Currently, the tightening in zinc ore supply is gradually being passed on to the smelting sector, and some smelting companies have already begun to respond. Due to the tight supply of zinc ore and low processing fees, South Korea’s Koryo Zinc, the world’s largest independent smelter, plans to... 2017 Year-on-year decrease 7.7% Refined zinc production to 59.99 Ten thousand tons.

　　According to Metal Bulletin the news that, currently, the negotiation on processing fees is based on 2800 U.S. dollar, processing fee range: 155—175 between the U.S. dollars, while last year Teck The processing fee negotiated with Glencore is: 188 Dollar, benchmark price only 1500 Dollar.

　　Currently, there remains a significant divergence of opinion between the smelters and mining companies on this issue; some mining companies hope to see prices as low as... 135 the U.S. dollar, while smelting companies hope to reach as high as 185 U.S. dollars. Despite the upward revision of the benchmark price, processing fees continue to decline, reflecting that the supply of zinc ore available for trading on the market remains tighter than expected and continues to be in a relatively tight situation.

　　There’s even talk of abolishing price-sharing arrangements, but some smelters argue that while price sharing could be reduced, eliminating it altogether would make no sense. Meanwhile, mining companies believe that the current pricing is based on... 85% pricing at that level, but in reality, smelting enterprises can achieve recovery rates as high as 96% As mentioned above, this will enable greater zinc production. Eliminating price-sharing arrangements would clearly benefit mining companies at the expense of smelting enterprises. Overall, the likelihood that processing fees will decline is quite high, which also underscores the tight supply situation for zinc ore this year.

　　It's difficult to release the additional supply from mines.

　　On the domestic market, zinc ore supply has seen a significant drop in inventories this year to... 20 About ten days ago, it was already gone—just like last year. 2–4 With a buffer of several months’ worth of inventory, zinc ore supply remained tight in the first half of the year. Given the high profitability of mines, the market expects that, once environmental regulations become more relaxed, the heightened enthusiasm for resuming zinc ore production will lead to a substantial increase in zinc ore supply.

　　However, at present, zinc mines remain under strict supervision by environmental protection authorities, and regions failing to meet standards face stringent requirements for production cuts or shutdowns. According to a survey conducted by My Color Network, the resumption of mining operations in Yunnan and Hunan—regions previously shut down due to environmental concerns—has fallen significantly short of expectations. As a result, it may still be difficult for domestic zinc mine output to increase substantially in the short term.

　　Zinc prices have fallen into the low-profit zone.

　　Last week, zinc prices plummeted sharply, causing smelting profits to decline rapidly and increasing the number of smelters undergoing maintenance. According to data from Shanghai Nonferrous Network, some smelters in southern China are taking measures to ensure that the actual processing fees for zinc concentrates remain at a certain level. 5300 Yuan / Near the metal ton level, with refineries undergoing maintenance and reducing production, processing fees in the southern region saw a slight increase. 100—200 Yuan / Metal ton. 3 Moon 13 On [date], key smelting enterprises in central and western China held a meeting and reached a consensus to flexibly adjust production plans, advance supply-side structural reform, and actively restructure industries, promote transformation, and enhance efficiency.

　　Consumer expectations are gradually recovering.

　　Although a stronger U.S. dollar will constrain the price trends of commodities, at present, the Federal Reserve’s consideration of raising interest rates—driven by expectations of improved demand stemming from economic recovery—will in fact help to balance supply and demand for commodities. Consequently, the negative impact of U.S. interest-rate hikes on commodities is expected to be relatively mild. Moreover, given zinc’s high degree of external dependence, both zinc ore and refined zinc will continue to require imports to meet domestic demand, which could push up the overall operating level of domestic commodity prices.

　　After the Chinese Spring Festival, downstream demand in China has gradually recovered; however, in the North China region, galvanized steel consumption remains constrained by environmental inspections. According to data from the China Iron and Steel Association, 1 The nationwide inventory of galvanized steel sheets for the month is: 56.13 Ten thousand tons, a significant year-on-year increase. 25.51% This also reflects that color-coated products in the North China region are significantly affected by environmental regulations due to dust pollution, thereby indirectly impacting the consumption of galvanized sheets. However, the peak season for demand for color-coated products generally begins from... 3 Starting next month, you can follow. 3 Will demand recover after mid-month, thereby boosting consumption of galvanized sheets once again?

　　However, judging from consumption trends in East China and Guangdong Province, demand has already improved, with pickup volumes showing no decline compared to last year, and the inventory turning point is becoming increasingly evident.

　　Meanwhile, rising prices of upstream products are gradually being passed on to the consumer end. Take tires as an example: with global tire prices on the rise, both the success in the anti-dumping and anti-subsidy cases will help boost consumer recovery.

　　In summary, zinc prices have fallen into a low-profit zone, while the supply of zinc ore remains tight. Although downstream demand is currently putting downward pressure on zinc prices due to environmental regulations, 3–4 Demand during the traditional peak season for the month is expected to increase, and currently, there is more room for zinc prices to rise than to fall.