The second week of January saw a small decline in the Indonesian Zinc market, representing an easing of confidence rather than a sudden correction. The decline continued the sideways trend noted in December, with trading participants pointing to a combination of seasonal factors and lower input costs as the main factors for the movement in Zinc prices. Participants reported a low level of trading activity and an overall cautious mood while adjusting their respective positions at the start of the year.
In general, the Zinc Powder producers in the domestic market have experienced relatively stable conditions, with operations running smoothly with no interruptions. The modest decline experienced has been attributed to the overall lower prices of feedstock, which allows producers to reduce their overall production costs and gives suppliers more leverage in their negotiations. Market participants were thus lowering Zinc pricing due to price adjustments during a normal slow time in the business cycle.
The supply and demand balance of Zinc in Indonesia continues to be very stable, with most producers around major industrialized areas producing their normal output and receiving a consistent supply of imported raw materials. There have been no significant supply chain interruptions, and logistics/port operations appear to be operating normally, therefore not impacting the volume of exports out of Indonesia. Most Zinc producers have reported sufficient inventories and thus are not feeling the pressure to dump material into the market, thus reaffirming the slow decline in Zinc prices noted during this week in the market.
About the demand side of the Zinc market, both domestic and regional utility purchasing activity continues to show limited upward momentum. As holiday inventory levels were evaluated in the region, the export demand for Zinc products declined, due to their decision to delay new purchases for January. Additionally, in Indonesia, the pharmaceutical and nutraceutical sectors have been running below normal levels of activity over the last several weeks, due to holiday obligations. As such, these sectors were only utilizing Zinc material from existing stock. Overall, this lower-than-average rate of offtake has resulted in steady but uninspiring Zinc consumption, which has not offered any support to the ongoing declining pricing trend.
Market participants will likely see some improvements over the next few weeks as Zinc's price stabilizes in Indonesia and potentially moves slightly higher due to the anticipated restocking by buyers after the close of the year, and an increase in inquiries from regional pharmaceutical and nutraceutical buyers regarding international exports of Zinc. As the inventories are rebuilt following the seasonal drawdowns at the end of the year, it is anticipated that International Zinc exporters will be increasing their price offers, while also offering further support for the tightening of spot availability. Therefore, Zinc market confidence is expected to continue to develop as more first-quarter purchases and improved visibility of demand improve.
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