SMM February 7 News:
Price: On the macro side, the impact of the US tariff increase policy has gradually weakened, and the policy changes of the Trump administration may fluctuate. Coupled with the resurgence of domestic "supply-side reform" discussions, macro sentiment has slightly improved. On the fundamentals side, although domestic mine production remains at a seasonal low, the SHFE/LME zinc price ratio fluctuates at highs, imported zinc concentrates continue to flow in, and port inventories across seven locations have increased to over 400,000 mt (metal content). According to SMM's communication, domestic smelters' production in January exceeded 520,000 mt, while February production is expected to decrease to around 470,000 mt. Smelters' raw material inventory has increased to over 28 days, suggesting that raw materials for smelters will not face significant issues until March. Smelters' purchase willingness remains low this month, and mainstream processing fees have continued to rise to approximately 2,600 yuan/mt (metal content), easing pressure on the mine side again. Post-holiday social inventory increased by 37,000 mt to 107,000 mt MoM, entering an inventory buildup phase. However, on a YoY basis, the increase fell short of expectations. This is partly due to a higher proportion of smelter plant deliveries this year and delays in logistics and transportation. It is understood that smelters' inventory buildup during the Chinese New Year may have exceeded 40,000 mt. With the recovery of logistics, social inventory is expected to continue accumulating this month, and actual destocking may not occur until March. Currently, downstream enterprises are gradually resuming operations, and attention should be paid to the subsequent performance of downstream consumption. Overall, inventory buildup falling short of expectations, combined with the influence of "supply-side reform" discussions, has led to a relatively strong zinc price trend. However, the accelerated easing on the mine side, coupled with no significant improvement in smelters' production for now, suggests that the trend of increasing production remains unchanged. Zinc prices are expected to have limited upside room. Attention should be given to overseas macro changes and the strength of domestic consumption recovery.
(The above information is based on market communication and comprehensive evaluation by the SMM research team. The information provided herein is for reference only and does not constitute direct investment research advice. Clients should make cautious decisions and not replace independent judgment with this information. Any decisions made by clients are unrelated to SMM.)
