Report Summary 1. Report Industry Investment Rating - Unilateral: Neutral [4] - Arbitrage: Neutral [4] 2. Core View of the Report - The spot market's restocking enthusiasm is low before the Dragon Boat Festival. Strong current consumption supports the zinc price to oscillate at a high level, but consumption may face a test in June, and there is a possibility of a month - on - month decline after June. Attention should be paid to inventory changes [1][3] 3. Summary by Related Catalogs Important Data - **Spot**: LME zinc spot premium is -$20.27/ton. SMM Shanghai zinc spot price is flat at 22,830 yuan/ton compared with the previous trading day, and the premium is up 25 yuan/ton to 440 yuan/ton. SMM Guangdong zinc spot price is down 10 yuan/ton to 22,850 yuan/ton, and the premium is up 15 yuan/ton to 460 yuan/ton. SMM Tianjin zinc spot price is flat at 22,840 yuan/ton, and the premium is up 25 yuan/ton to 450 yuan/ton [1] - **Futures**: On May 29, 2025, the main SHFE zinc contract opened at 22,300 yuan/ton and closed at 22,495 yuan/ton, up 135 yuan/ton from the previous trading day. The trading volume was 184,818 lots, an increase of 22,593 lots from the previous trading day. The position was 119,380 lots, a decrease of 3,627 lots from the previous trading day. The intraday price fluctuated, with the highest reaching 22,530 yuan/ton and the lowest 22,225 yuan/ton [1] - **Inventory**: As of May 29, 2025, the total inventory of zinc ingots in seven regions monitored by SMM is 75,000 tons, a decrease of 5,400 tons compared with the same period last week. As of May 29, 2025, the LME zinc inventory is 141,375 tons, a decrease of 2,075 tons from the previous trading day [2] Market Analysis - **Spot Market**: Traders continue to hold up prices, and the spot premium rises. The absolute price fluctuates, which does not meet the downstream's psychological expectations, so the pre - festival restocking enthusiasm is poor [3] - **Supply**: A zinc smelter in South China extended its maintenance due to an accident, and the specific resumption time is undetermined, which caused the zinc price to fluctuate and rise, but the rise lacks continuous power. The overseas mine output in the first quarter was lower than expected, but domestic smelters have sufficient raw material inventory. The TC in June will continue to rise, and smelting still makes a profit at the current TC price, so the supply pressure remains [3] - **Consumption**: The strong current consumption supports the zinc price to oscillate at a high level. Consumption may face a test in June. Since the time window for rush - exporting is approaching the end and there is an over - drafting situation, consumption may weaken month - on - month after June [3]

Core Viewpoint - The zinc market has been experiencing low-level fluctuations for nearly two months, with a focus on whether the supply from mines can meet demand in the future [2][7]. Group 1: Market Dynamics - Since early April, zinc has faced widespread selling due to escalating international trade tensions, remaining below 22,500 points [2]. - Recent maintenance at zinc smelting plants has been higher than usual, despite stable processing fees for zinc ore [3][4]. - A significant zinc smelting plant in southern China extended its maintenance period, impacting production by an estimated 20,000 to 40,000 tons, which led to a price increase [3]. Group 2: Supply and Demand Factors - The decline in social zinc inventory continues, although the demand from downstream sectors remains resilient [5]. - The real estate sector's weakness has slowed the destocking of galvanized inventory, with new construction area starting in the first four months of 2025 down 23.8% year-on-year [5]. - Domestic zinc imports have reached historical highs, contributing to a stable supply environment for smelting plants [7][8]. Group 3: Future Outlook - The mid-term outlook suggests increasing pressure on zinc supply due to the resumption of production at smelting plants and the seasonal slowdown in demand [7]. - Analysts predict that the zinc market may experience a shift towards a bearish trend as supply begins to outpace demand, with expectations of inventory accumulation starting in mid-June [7][8]. - The processing fees for zinc ore are expected to remain strong in the third quarter due to high demand, despite an anticipated oversupply of zinc ingots [8].

Core Viewpoint - Zinc prices have been fluctuating within a range following a significant drop due to tariff announcements, with domestic zinc prices hovering between 21,900-22,800 CNY/ton and LME zinc prices around 2,700 USD/ton, influenced by macroeconomic sentiments rather than strong fundamental pressures [2][8]. Macroeconomic Factors - The US-China trade talks made significant progress in mid-May, with both sides agreeing to suspend additional tariffs for 90 days. However, the US has threatened to impose a 50% tariff on the EU starting June 1, causing short-term volatility in financial markets [3]. - The bond market is showing signs of panic, with Japan's 20-year bond auction underperforming and Moody's downgrading the US credit rating, leading to a decline in the US dollar, US bonds, and US stocks simultaneously [3]. - China's social financing and M2 growth rates are stable, but new RMB loan data is disappointing, indicating a potential slowdown in key economic indicators [3]. Supply Side Dynamics - Global zinc mine production reached 1.0184 million tons in March, a month-on-month increase of 10.2% and a year-on-year increase of 2.6%. The cumulative production from January to March was 2.902 million tons, up 3.75% year-on-year [4]. - China's zinc concentrate production in April was 297,700 tons, a month-on-month increase of 4.5% but a year-on-year decrease of 6.6%. Zinc ore imports surged to 494,700 tons in April, a 37.6% month-on-month increase and a 72.6% year-on-year increase [4]. - Domestic smelters are experiencing a rise in processing fees due to ample supply from both imported and domestic sources, with processing fees for domestic zinc concentrate averaging 3,650 CNY/ton in June [4]. Production Stability - Global refined zinc production in March was 1.1219 million tons, a month-on-month increase of 9.7% but a year-on-year decrease of 3.9%. China's refined zinc production in April was 576,000 tons, a slight decrease from March but a year-on-year increase of 0.3% [5]. - The profitability of smelters has improved, with production losses remaining below 500 CNY/ton, leading to expectations of increased production in the near future [5]. Inventory Levels - Domestic refined zinc inventories are gradually declining, with SMM's seven-city zinc ingot inventory at 80,400 tons as of May 22, which is low compared to previous years [6]. - LME zinc inventories have also seen a slight increase but remain at a low level, which may provide some support for zinc prices [6]. Demand Trends - Demand is showing signs of weakening as the peak season ends, with the operating rate of galvanizing enterprises recovering to around 62%, while die-casting zinc alloy enterprises have seen a drop to 56.41% [7]. - The construction sector remains stable, with a narrowing year-on-year decline in new housing starts and steady growth in infrastructure investment [7]. - However, production in the white goods sector has seen limited growth, with significant declines in refrigerator and television production [7]. Summary - Overall, the impact of tariffs is diminishing, and a weaker dollar is providing some support for non-ferrous metals. Despite low inventories providing price support, the expectation of increased supply against weak demand suggests that zinc prices may struggle to rise significantly in the short term, likely remaining in a weak oscillation [8][9].

Report Summary 1. Report Industry Investment Rating - Unilateral: Neutral [4] - Arbitrage: Neutral [4] 2. Core View - The spot market premium in most regions is weakening, and downstream demand remains cautious due to high prices. Although overseas mine production in Q1 was lower than expected, the surplus expectation of zinc ingots remains unchanged. There is still profit in smelting, and supply pressure persists. Consumption in May may face challenges, and attention should be paid to inventory changes [3]. 3. Summary by Related Catalogs Spot and Futures Market - **Spot**: LME zinc spot premium is -$29.83/ton. SMM Shanghai zinc spot price rose by 150 yuan/ton to 22,760 yuan/ton, with the premium falling by 25 yuan/ton to 205 yuan/ton. SMM Guangdong zinc spot price rose by 200 yuan/ton to 22,700 yuan/ton, with the premium rising by 25 yuan/ton to 145 yuan/ton. SMM Tianjin zinc spot price rose by 150 yuan/ton to 22,740 yuan/ton, with the premium falling by 25 yuan/ton to 185 yuan/ton [1]. - **Futures**: On May 21, 2025, the Shanghai zinc main contract opened at 22,530 yuan/ton and closed at 22,580 yuan/ton, up 160 yuan/ton from the previous trading day. The trading volume was 98,502 lots, an increase of 3,796 lots, and the position was 67,175 lots, a decrease of 9,455 lots. The intraday price fluctuated between 22,510 - 22,675 yuan/ton [1]. Inventory - As of May 19, 2025, the total inventory of SMM seven - region zinc ingots was 83,800 tons, a decrease of 1,700 tons from the same period last week. As of May 21, 2025, LME zinc inventory was 157,875 tons, an increase of 1,150 tons from the previous trading day [2]. Market Analysis - In the spot market, inventories in Guangdong are continuously declining, while premiums in other regions are weakening. After the rebound of absolute prices, downstream buyers are still hesitant due to high prices and make inquiries and purchases based on rigid demand. Overseas mine production in Q1 was lower than expected, but the surplus expectation of zinc ingots remains unchanged. Although the increase in TC is limited, smelting still has profits, and the supply pressure persists. Domestic imported ore inventory is sufficient, and domestic ore TC is still rising. Consumption in May may face challenges, and there is a possibility of a sequential decline in consumption after May [3].