1. Report Industry Investment Rating - The investment rating for zinc is "Bullish" [5] 2. Core Viewpoints of the Report - In the second quarter, the zinc market may face a series of high - impact and low - predictability events, with macro - expectations' sharp swings likely to cause price overshoots frequently. Macro risks have reached an absolute high in the past five years. Risk exposure management should be prioritized, and position management and hedging operations are more important than accurately predicting the equilibrium point [1][18][22] - Overseas mining companies have significantly revised down their production guidance. With geopolitical disturbances and intensified resource competition, the expected supply gap overseas may widen. In China, the increase in zinc concentrate production is mostly expected in the second half of the year, and imports from major sources are temporarily blocked. The smelting - mining balance may tighten in the second quarter, and domestic TC is under pressure, with smelter production cut pressure becoming clearer later [1][138] - In the second quarter, domestic smelters may maintain high operating rates, while the probability of overseas smelter production cuts is still tied to geopolitics. High - risk smelters are mainly in Europe, Japan, and South Korea, and disturbances are more likely to occur later. There is a differentiation and structural shift in domestic and overseas demand. Overseas demand is generally weak, while domestic demand can be viewed optimistically. The inflection point of global visible zinc ingot inventory may have arrived, but there may be no shortage of zinc ingots at home and abroad in the second quarter [2][139] - In the second quarter, zinc prices face multiple and unpredictable continuous macro risks, and there is a risk of a sharp decline due to systematic risks in extreme cases. However, the long - term supply of zinc ore is tightening, TC is under pressure, and demand shows no sign of weakening. If there is a sharp decline, it is likely to be a mispricing. A long - term buy - on - dips strategy is recommended, and some cash should be reserved for risk hedging. In terms of arbitrage, the expectation of loose domestic and tight overseas supply may reverse, and long - term domestic - overseas positive arbitrage may not run smoothly. Zinc prices may be low in the front and high in the back, with the main operating range of [22,500, 24,500] [3][139] 3. Summary According to the Directory 3.1 Market Review - The report was bullish on zinc prices in 2026 in the annual report, expecting higher volatility and an initially weak domestic and strong overseas fundamental situation. In the first quarter, zinc prices first rose and then fell, and then fluctuated around 23,000 - 24,000 yuan/ton, which was basically in line with expectations. In January, zinc prices reached a new high in nearly four years, driven by geopolitical risks and optimistic expectations of the Fed's interest rate cuts. However, in late January, the nomination of Kevin Warsh as the next Fed chairman reversed the expectations of monetary policy easing, and zinc prices fell with the market. In February, zinc prices entered an adjustment period. In March, after the US - Iran conflict, macro factors dominated price fluctuations, and zinc prices were under pressure [13] 3.2 When Macro Uncertainty Becomes Certainty, Risk Control May Be the Top Priority - In the second quarter, zinc trading may be more focused on macro factors. Geopolitical disturbances are intensifying, and the probability of black - swan events is increasing. Trump's policy style is complex and changeable, and events such as geopolitical situations, tariff expectations, and the US election are highly uncertain. The US - Iran conflict is difficult to ease in the short term, and energy prices are likely to remain high. The US mid - term elections are approaching, and Trump's poll support rate has declined. The US debt credit crisis is eroding the safe - asset attribute of global US - dollar assets, and the 10 - year US Treasury yield is approaching a critical point. The S&P 500 VIX is rising, and the gold - platinum ratio indicates a high - risk window for the US stock market from the second quarter to the end of 2026. Macro risks have reached an absolute high in the past five years, and price fluctuations may be more affected by macro - expectations. Risk exposure management should be prioritized [18][19][22] 3.3 Supply Side 3.3.1 Mine End: The Expected Gap of Overseas Zinc Mines May Further Widen, and TC Will Continue to Run Under Pressure - Overseas, in Q4 2025, zinc concentrate production decreased quarter - on - quarter, and the 2026 production guidance was significantly lowered. Geopolitical disturbances have changed the overseas zinc mine expectation from loose to tight. In 2025, the global zinc concentrate production was 12.57 million tons, a year - on - year increase of 652,000 tons (YoY + 5.5%). In Q4 2025, the overseas sample zinc concentrate production was 1.288 million metal tons, a year - on - year increase of 44,000 metal tons (YoY + 3.6%) and a quarter - on - quarter decrease of 15,000 metal tons (QoQ - 1.2%). In 2026, the sample enterprises' production guidance decreased by 11% year - on - year. In the first quarter, overseas zinc mine production expectations changed greatly due to geopolitical disturbances, production guidance adjustments, and weather effects. In the long - term, overseas zinc mine supply may further decline. Domestic zinc concentrate production in January - February 2026 was 519,000 metal tons, a year - on - year increase of 28,000 metal tons (YoY + 5.6%), and most of the domestic zinc mine increment is expected in the second half of the year. In January - February, domestic zinc concentrate imports increased by 17.5% year - on - year, but the import window closed again. The inflow of imported zinc ore is restricted, and the TC of imported and domestic zinc ore is likely to be under pressure in the second quarter [26][31][33] 3.3.2 Overseas Smelting: The Energy Price Center Rises, and Attention Should Be Paid to the Possibility of Production Cuts by Smelters in Japan, South Korea, and Europe - In January 2026, the global refined zinc production was 1.156 million tons, a year - on - year increase of 19,000 tons (YoY + 1.68%). The 2026 Benchmark was set at $85/ton, slightly higher than in 2025, indicating that the shortage of overseas zinc mines has not improved significantly. Due to the damage to energy infrastructure in the Middle East, natural gas prices have risen significantly, and smelters in Europe, Japan, and South Korea may face production cut risks. In Europe, although the current electricity price has not reached the extreme level in 2022, and the overall energy cost pressure of zinc smelters is relatively controllable in the short term, Japanese and South Korean smelters face greater cost pressure. In the second half of the year, attention should be paid to the impact of El Niño on power supply. The affected zinc smelters may reduce production by 50,000 - 400,000 tons [41][46][50] 3.3.3 Domestic Smelting: Smelting Profits May Be Under Pressure, but High Operating Rates of Smelters Are Difficult to Reduce - In January - February 2026, domestic smelter production was 1.065 million tons (YoY + 6.2%), and after the Spring Festival, smelters resumed production on a large scale. The domestic TC has been fluctuating, and after the US - Iran conflict in March, the imported TC showed a marginal decline. By - product prices are differentiated, and zinc smelting profits are oscillating at a high level. Domestic zinc smelters' raw material inventory is at a relatively high level, but some smelters highly dependent on imported ore still face supply pressure. If the geopolitical situation deepens, the TC of imported ore may continue to decline, and smelting profits may be under pressure. The discussion on smelter production cuts may be more likely to occur in the second half of the year. In January - February, domestic refined zinc imports decreased by 61% year - on - year, and the import window has been closed. It is expected that domestic refined zinc imports will remain at a low level in 2026 [54][62][67] 3.4 Demand Side 3.4.1 The Initial Downstream Performance Is Weak, and Exports Are the Main Support - In January - February, domestic refined zinc demand was slightly weaker than the same period last year. In March, the downstream showed marginal improvement, and the supporting factors were the tower field and galvanized exports. The domestic galvanized plate market has weak domestic demand and strong exports. The domestic inventory of galvanized coils accumulated to a relatively high level during the Spring Festival, and the inventory clearance was slow. However, the export performance was excellent, and the orders from Japan, South Korea, and Europe increased. In the long - term, anti - dumping and export policies may have a certain suppressing effect. The die - casting zinc alloy sector is generally weak, with low domestic demand and limited export growth. The zinc oxide demand shows a structural differentiation, with poor performance in traditional application fields. The downstream raw material and finished product inventories are at a low level, and the downstream has a certain elasticity to buy on price increases [68][70][76] 3.4.2 The Efficiency of Fund Allocation Improves, and the Physical Workload Is Expected to Recover in the Second Quarter - In January - February, fixed - asset investment started to recover, and the speed of fund allocation increased. The government's fiscal policy is more active, and the deficit rate in 2026 is 4%. As of March 20, local bond issuance exceeded the plan by 5.5%. The issuance progress of new special bonds is slightly ahead of last year. The new special bonds in January were mainly invested in traditional infrastructure fields, and the proportion of non - new projects increased. The actual operation shows that the investment growth rate of the three major general infrastructure fields is stable, and the new contract amount of key enterprises is expected to increase. The infrastructure physical workload is generally low, and the power sector is expected to become an important support in the future. The real estate sector still lags behind the seasonality, and the drag on zinc consumption may be marginally alleviated, but the rebound space is limited [79][80][90] 3.4.3 Durable Consumer Goods Demand Is Weak at Home and Strong Abroad, and Consumption Is Expected to Improve in the Second Quarter - In the first quarter, durable consumer goods demand was generally weak, with a pattern of weak domestic and strong overseas demand. In January - February, the production and sales of passenger cars decreased year - on - year, mainly due to policy and market factors. However, automobile exports increased significantly, driven by the advantages of the domestic automobile industry chain. In the second quarter, domestic automobile demand may recover marginally, and exports are expected to remain strong. The domestic home appliance market showed a weak recovery in domestic demand and an unexpected rebound in exports. In the second quarter, domestic home appliance demand is expected to further improve, and exports may maintain stable growth [100][105][110] 3.4.4 Energy Price Increases Raise Inflation Concerns, and Some Overseas Demand May Be Converted into Domestic Exports - In January, overseas refined zinc consumption increased year - on - year, with good performance in India, Europe, and the United States. The export of zinc primary processed products showed different trends in the first two months, with zinc alloy and zinc oxide exports increasing. The export demand may change over time and is highly related to geopolitical evolution. In the short term, orders from Europe, Japan, South Korea, and Southeast Asia are concentrated in China, but in the medium - term, exports to the Middle East may be affected. In the long - term, some overseas demand may be converted into domestic exports [114][121][123] 3.5 Global Zinc Ingot Visible Inventory May Enter the Decline Stage - From the fourth quarter of last year to the first quarter of this year, zinc ingot inventories at home and abroad accumulated successively, and the global visible zinc ingot inventory increased significantly, suppressing zinc prices. Overseas, the LME zinc inventory increased twice, and then gradually decreased due to consumption. In China, zinc ingot inventory accumulated during the Spring Festival due to production release and slow consumption recovery. In the second quarter, domestic zinc consumption and exports may increase, and the inventory inflection point may have appeared, but the inventory clearance speed may be relatively stable [130][137] 3.6 Summary and Outlook - Macro aspect: In the second quarter, macro risks are at an absolute high in the past five years, and risk exposure management should be prioritized. - Smelting - mining balance: Overseas supply expectations may further deteriorate, and domestic zinc concentrate increment is mostly in the second half of the year. The smelting - mining balance may tighten in the second quarter, and domestic TC is under pressure. - Zinc ingot balance: Domestic smelters may maintain high operating rates, and overseas smelter production cuts are related to geopolitics. Domestic demand can be viewed optimistically, while overseas demand is weak. The global visible inventory inflection point may have arrived, and there may be no shortage of zinc ingots at home and abroad in the second quarter. - Trading aspect: In the second quarter, zinc prices may face a sharp decline due to systematic risks, but in the long - term, zinc is still valuable. A long - term buy - on - dips strategy is recommended, and cash should be reserved for risk hedging. Zinc prices may be low in the front and high in the back, with the main operating range of [22,500, 24,500]. - Strategy aspect: For single - side trading, a long - term buy - on - dips strategy is recommended, and short - term risks should be avoided. For arbitrage, a positive inter - period arbitrage strategy can be adopted, and domestic - overseas positive arbitrage should be observed for the time being [138][139][141]