The Zinc market in Indonesia eased slightly at the beginning of January. It reflected a small decrease of 0.7% as prices gradually decreased to market levels due to a reduced level of trading activity. Seasonal factors rather than a fundamental market weakness were the cause of the decreased value; the lower-feedstock cost provided producers with more mass margins and allowed producers to make minor adjustments in their offers. The level of market activity was restrained by the limited participation of both exporters and domestic buyers, who limited their activity in the spot market due to holiday-related inactivity. The supply for the period was steady as demand was also steady and unaffected by active production and distribution schedules, and active operating hours were in place as both companies operated regularly and had enough inventory and logistics capability available, which therefore prevented any excessive volatility. Demand indications from many markets were neutral overall. Importers to Southeast Asia stopped buying altogether, while domestic buyers in the pharmaceutical and nutraceutical markets had limited schedules and relied on previous deliveries. There is, however, a growing sense of optimism regarding the remainder of January. Market analysts expect that stability will lead to a moderate period of recovery in the coming weeks of January in response to Restocking of the year's beginning, increased export inquiries into Southeast Asia, and a solid first-quarter gas-buying rebound upon buyers' return to the market after the holidays.
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.
