For the Quarter Ending June 2022
The value of Zinc soared over the first half of the second quarter of 2022 until May, and then it started to fall in June. Due to intense rivalry with Europe for available units and lower-than-expected output, zinc premiums in the US reached all-time highs in May. However, the extensive supply chain and prolonged port interruption continued obstructing the supply system throughout the quarter. Multiple ports were observed congested, with empty store shelves, idle factories, and billions of dollars worth of goods stuck in overloaded distribution networks. A lingering COVID pandemic in China has affected many elements of the country, including transportation, demand, and other areas, in addition to the combative signals from the US Fed, which in May signaled both an interest rate hike and a reduction in the balance sheet. After May, supply and demand both began to deteriorate as imports were curtailed due to lockdowns imposed in China.
Zinc powder prices in the Asia Pacific region in Q2 2022 showed conflicting feelings for several reasons. During the first half of Q2, prices in China somewhat increased on the domestic market due to higher zinc metal prices brought on by the ongoing Russian invasion of Ukraine, which forced numerous zinc smelters to halt or scale back zinc metal output. Fears that the economy may collapse in the second quarter of 2022 were sparked by a sharp slowdown in China's economic activity in April when lockdowns severely disrupted employment and industrial production. During the week ending April 29, prices in the market increased slightly as inventory levels in seven of China's major markets decreased. On the other side, declining LME zinc prices upset the market's equilibrium and caused SHFE zinc prices to decline. As the SHFE/LME pricing ratio improved in the second half, exports continued to be impacted. After May, the China producer pricing index (PPI) dropped to 8%, the market turned negative, and prices became limited because downstream orders were less than anticipated. An industry expert said, "Demand headwinds were generated by China's zero-COVID tight policy, energy-driven inflation, rising real US rates, and a strengthening dollar."
The second quarter of 2022 saw bearish sentiments on the zinc market in the European region. Despite the market's weakening, premiums remained high as ongoing logistics problems weighed on regional consumer demand. Due to a limited supply and logistical issues in Europe, zinc prices remained noticeably high over the quarter. According to a market analyst, several logistical obstacles and high energy costs support a high premium level. Customers are starting to ask to delay orders from [the third quarter] until 2023, which is a hint of possible fragility. Offtakes in the downstream industries were steady throughout the quarter, which is good news for the demand side. This situation was reflected in the zinc market of Italy, where premiums moved down from their record level during the second week of June, following a rise in bearish sentiment and weakening demand.
"I am not sure that premiums can maintain these high levels for much longer," one regional trader said. He added that if the premiums stayed high for the remainder of the year, it would be difficult for consumers to operate because of other rising costs, such as energy.
For the Quarter Ending March 2022
The US Zinc market entered the 1st quarter of 2022 with positive sentiments as the CFR California prices escalated slightly from USD3420/mt to USD3490/mt between January and March. As a result of the military confrontation between Russia and Ukraine, trade between the United States and Asia was severely disrupted in mid-H1 of 2022. As the conflict ripples caused delays in the transportation of commodities and spurred higher shipping rates to the already congested ports in the US, several traders were seen keeping a tight eye on freight expenses. The increased demand for Zinc prompted a huge number of businesses to reopen after the CNY holidays, resulting in an increase in the number of orders from the United States. On the back of the uncertainty surrounding the Russia-Ukraine armed confrontation, risk aversion was observed to be rather severe in the second part of Q1. On the demand side, domestic offtakes from downstream sectors remained positive.
During Q1 of 2022, the prices of Zinc Powder improved marginally across the Asia Pacific region. In China, Zinc discussions for FOB Qingdao and Ex-Shanghai got fixed at USD2455/mt and USD2395/mt in the month ending March. Due to the rising number of Omicron variant cases in China, leading producers including NHU and ZMC declared forced closure due to the country’s zero-tolerance policy, which exacerbated the prices of several commodities across the country. In the second half of the quarter, during the Beijing winter Olympics and Spring Festival holidays in China, the demand for Zinc increased significantly from the food and beverage industries, which further supported the price trend in the spot market. The country's increasing energy prices, owing to coal shortages and a zero-tolerance covid policy, as well as pandemic preparedness, prompted delays in coal customs clearance, causing zinc prices to rise across the board. Furthermore, due to the Winter Olympics and the Lunar New Year, there were fewer working days in February, which contributed to the overall lower output.
During the 1st quarter of 2022, the prices of Zinc Powder hopped upwards across the European region on the back of the firm demand. However, lack of supplies somehow disrupted the market sentiments during the quarter. During the second half of first quarter, as the turmoil in Ukraine caused shortages for European industries who rely heavily on Russian supplies, commodity dealers rushed upward to benefit from a once-in-a-lifetime opportunity to transport metals out of China. In Q1, the sharp escalation of a worldwide supply crunch affected European customers the hardest. Furthermore, with global supplies running low, analysts and dealers said the unusual flow of metals from China to Europe only provided temporary relief, while Russian exports remained hampered. The prices of Zinc Powder were fixed at USD2560/mt towards the quarter end.
For the Quarter Ending December 2021
During the 4th quarter of 2021, the market trend of Zinc demonstrated a state of stagnancy across the North American region. The prices of Zinc stabilized in the month of November and settled at USD 3560 per MT CFR California after gaining close to percent in Q3 on the back of weakened supply dynamics. The demand remained consistent throughout quarter 4 by several market participants while remarking that supply fundamentals gained strength in the wake of enhanced supply chains through high logistics availability and stability in fuel costs. The demand for Zinc in the US domestic market is likely to dip following the global demand pattern, which is expected to cause a price decline in Q1 2022.
In the Asia Pacific region, the price trend of Zinc Powder showcased mixed sentiments during the fourth quarter of 2021. In China, market players reported that supplies remained affected in November as Beijing imposed nationwide power curbs due to a slew of factors, including rising coal prices and the nation’s commitment to cut carbon dioxide emission sharply by 2030, which affected the Zinc prices across the country. The shortage of electricity increased the concerns regarding the restart of Zinc smelters, which led to the sharp gains in zinc powder prices in the week ending of November as prices settled at USD 2466/MT FOB Qingdao. The Chinese domestic market was heavily impacted in Q4 by the soaring energy prices power shortages in several provinces as zinc smelting is a major electricity consumer. In the month of December, the increased price competitiveness followed by the surged onboarding activities resulted in a decline in the Zinc prices as the Chinese manufacturers were destocking their inventories ahead of the year-end. In the Indian domestic market, the demand for Zinc remained strong in quarter 4, exceeding the production rate and inventories level of the country. The CFR JNPT prices of Zinc were assessed at USD 3942.60 per MT in December.
In Europe, the domestic market trend of Zinc witnessed an upward trajectory in quarter 4 of 2021 on the back of the strong demand and limited supply. The prices of Zinc reached historical highs across Europe and jumped more than 5% in mid-December on the back of the supply concerns after Belgium-based Nyrstar said it would shutter its plant in France from January due to soaring energy prices.