The higher the resistance the greater the zinc market rebound

Zinc prices hit a year since the beginning of a new high and has been weakening, but rebounded in June in the metal has performed better, rebound momentum at the forefront of metal products. The reason why zinc prices rebound slightly ahead, the following main reasons: First, the callback in the process of pre-metal zinc prices had the largest decrease during zinc prices have rebounded a point advantage, which is the value investors that their depression or oversold; Second, in May the first zinc smelting enterprise maintenance shutdown; Third, zinc and consumption in Europe and America have maintained good momentum to drive the global zinc market to reduce the overall excess capacity; 4 euro oversold bounce, nearly a month of continuous adjustment of the dollar. The medium term, zinc prices, is still not optimistic, as the global economic slowdown is a foregone conclusion, zinc and seasonal off-season market in the downstream industry, the state canceled the export tax rebate, there is risk aversion and investor pressure to transfer the excess supply and strong Zinc prices will limit the height of rebound.


Maintenance shutdown in China to stimulate a strong rebound in zinc prices

Zinc consumption in China has gradually entered the seasonal off-season market, together with zinc processing fees from the 160-180 U.S. dollars / ton down to 90 U.S. dollars / ton, zinc smelting companies in China zinc prices fell below the industry average cost of line shutdown that followed maintenance initiatives, which in the rebound in zinc prices relatively strong performance, but the rebound height also depends on the intensity of cut.

In May, the domestic part of the zinc smelting enterprises have started shutdowns. It is understood that involves 40 different sizes of domestic smelting enterprises, the total operating rate of 85.6% from April dropped by 3 percentage points to 82.6%, in which idle capacity of 80,000 tons. At the same time, the current part of a large smelter in the north have begun to adjust production, estimated in June that these smelters cut a total of about 16,000 tons.

Reduce excess capacity in the first half, second half or a comeback

International Lead and Zinc Group (ILZSG) latest figures show that the global zinc market surplus increased from 259,000 tons last year dropped to 180,000 tons. Currently, the global zinc market showed a strong rebound in Europe and the United States of zinc consumption, while China's pattern of weak growth in zinc consumption. It is understood that China's refined zinc production in May rose 32%, an increase far higher than the global growth, domestic consumption growth over the same period was only 19%.

ILZSG data showed the West in April business inventories of zinc reached 9.782 million tons, of which the manufacturers of zinc inventory is 30.5 million tons, lower than March's 320,000 tons. Dominant global zinc stocks of zinc excess pressure has not shown there was a great relief. Currently, real estate regulation and control down, car sales are already showing signs of fatigue, Europe and the United States developed the real estate market downturn reproduction are exacerbated by the seasonal consumption of off-season pressure on zinc prices. Therefore, the excess pressure in the second half comeback zinc market is very likely.

The global economic slowdown is a foregone conclusion

Currently, a number of economic data and international large-scale research studies have shown that the global economic slowdown is a foregone conclusion, since a result, real estate and automotive industries weakened demand for galvanized sheet. U.S. June ISM manufacturing PMI fell 2 months straight; U.S. June ISM services sector index fell to 55.4 from the 53.8 in May; June non-farm employment declined by 12.5 million higher than estimated 11 million people.

China's economic restructuring, the domestic real estate transfer and credit control efforts continued unabated. China's June manufacturing PMI also fell to 52.1 for two consecutive months, suggesting that China's industrial expansion slowed. With the nation on the real estate sector continued to implement control policies, real estate investment is very likely to fall. In addition, exports will face in the third quarter fell, due to trade protectionism and Europe cut spending.

Expenditure cuts will drag the global economy

At present, European countries saddled with heavy debt, the second half of the intensity required to increase the cut public expenditure, which means exit strategies to accelerate economic growth will be strong enough to face the risk of endogenous, while zinc widely used in real estate, industrial manufacturing, delivery investment and transport and infrastructure construction.

Reduction of expenditure means that the negative effects of European debt crisis began to emerge: First, to ease the financial crisis, major economies have to cut expenditure, means that the economic recovery so far is still the main support of the economic stimulus had to quit early; Secondly, Financial constraints have led to declining public demand and high unemployment, deteriorating consumer sentiment combined to exacerbate the demand downturn, weak investment; Finally, sluggish domestic demand, trade protectionism and interactive, global trade will also be affected.

In short, the global economic recovery has slowed down a foregone conclusion, the European cut financial costs and economic transformation in China have increased the economic downturn. The world's largest consumer of zinc - the slowdown in demand for zinc to zinc price of a heavy blow. Maintenance shutdown of Chinese zinc producers in the context of unfavorable macroeconomic environment can play a supporting role, not enough to support the higher zinc prices back into the orbit, and thus the medium-term zinc price trend is still not optimistic.