Expert zinc market insights
Our quarterly zinc outlook is published in our Quarterly Metals Report, which covers base, precious and ferrous metals. The impact of supply and demand fundamentals and macroeconomic implications for the zinc futures and spot prices are analysed. Our research team produce a zinc price range forecast as part of the report.
Zinc Outlook – Q4 2022
Tightness of material in China has caused backwardations on the SHFE market after maintenance at smelters and previous destocking along the supply chain causes tightness. LME spreads are also tight due to a lack of material, but consumption is weak, and people are deferring delivery. We expect energy prices to rise, capping consumption of the end-user but the market. Chinese production will not increase until November when maintenance finishes and this will keep spreads backwardated, especially if galvanizers increase consumption. TCs are high for imported material, but domestic TCs are catching up, and this boosts profitability and therefore production in the longer run. We expect tightness to continue in the near term...
The macroeconomic outlook is deteriorating, and in our view, Europe and the UK are in recession already, and the US will be 6 months behind. Higher interest rates, in conjunction with elevated energy and electricity prices, are squeezing households’ disposable income, and new mortgage rates are considerably higher and are now a fixed cost to the consumer. We expect end-user demand to decline, and this will have an impact across the whole supply-chain; although material availability is poor for metals with bonded and exchange warehouses low in stock, this will lead to a dislocated market and volatile price action in spreads, while the macro impacts the flat price. The 20th Party Congress has ended, and their COVID policy is here to stay. As a result, sentiment in China has declined, and if the output of refined materials rises, this will put further pressure on prices. The Fed has increased the rates by 75bps with 50bps to come, but investors are looking at where they pivot, and any dovish language will cause a selloff in the dollar, giving rise to metals prices. If Chinese demand returns and the dollar weakens, this could present significant volatility and price rises, compounded inflationary pressures.
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