The hottest zinc market outlook in 2019 marginal v

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Outlook of zinc market in 2019: marginal variables pry the market. Zinc prices are easy to rise but difficult to fall

high zinc prices attract zinc concentrates to increase production in succession: even though zinc prices have reversed 50% of the increase in 2018, the current price still makes global mines profitable, and mining projects will be actively launched in the next three years

excess zinc resources in the next three years: in view of the considerable production of zinc concentrate projects, under the premise of the same year-on-year growth rate of consumption in 2019, zinc concentrate is in excess of resources corresponding to zinc consumption. From the perspective of long-term cycle, zinc prices need to fall until the supply of residual zinc ore has been compressed by the main drafters of this standard: Jiang bingnian, Kang Jianhua, Bao Junhai, Gong junfan, Yang shiye

however, there is a soft bottleneck in smelting: due to the limited increment of refined zinc production capacity in the next three years, and the sluggish start-up of existing production capacity due to domestic environmental protection, relocation and other factors, under the background of no more smelting and production, the link from excess zinc concentrate to excess zinc ingots is blocked, and the zinc ingot Market will only be slightly surplus in 2019

low inventory will continue to disturb the market: at present, the global dominant inventory has been low to the historical extreme value, and the zinc ingot Market is slightly surplus in 2019, which means that the market will continue to be disturbed by low inventory throughout the year; In terms of the split quarter, the inventory will be deeply removed in the peak consumption season in the second quarter, which provides fundamental support for the occurrence of extreme market

based on this, the zinc price in 2019 is easy to rise but difficult to fall: it is expected that the price will be high before and low after the year. With the intensification of fundamental contradictions, it is expected that the high point in the year will be around the second quarter, and the core dollar/ton of Lun zinc; Shanghai zinc main yuan/ton. It should be emphasized that because the existing inventory is too low, the marginal change will amplify the market response, especially in the period when fundamental contradictions are easy to intensify

risk tips

rapid recovery of China's smelting: since the main variable in the smelting link lies in China, and we estimate the zinc ingot output according to the time schedule of smelting solutions in key areas of environmental protection, if domestic environmental protection is relaxed quickly at the beginning of the year, the zinc ingot output will be greatly increased, the market surplus will intensify, and the inventory will accumulate rapidly, which will accelerate the process of price decline

consumption collapse: Based on the conservative estimate that the consumption growth rate in 2019 is flat, there will be a slight surplus in the zinc market next year. If the zinc consumption further worsens, the low inventory pattern will be ended ahead of schedule and the decline of zinc prices will be accelerated

I. review of the zinc market in 2018

1.1 the absolute price fell and nearly half of the increase was reversed

after two years of unilateral rise, the zinc price hit a record high in early 2018. Lun zinc is 3595.5 dollars/ton; Then it began a half year decline process, and nearly half of the increase was retrenched within half a year. After entering the third quarter, it stopped falling and stabilized, and turned to the pattern of range shock, hovering in the US dollar/ton range

as the performance of zinc price is no longer enthusiastic, the market attention and participation have also decreased significantly. The position of Shanghai zinc in 2018 was significantly lower than that in 2017, and the position was basically maintained at 10000 hands. The decline in the market participation of Shanghai zinc shows that the market regards it as no longer a variety with sharp contradictions

1.2 the relative price gain under low inventory is significant

after the reduction of supply in the first half of the year, the global zinc ingot negotiable inventory continued to decline, repeatedly refreshing the historical low value. Since the third quarter, the zinc price has entered the consolidation range, but the relative price market is in full swing. The spot tension caused by low inventory began to intensify at the end of the second quarter and fully broke out in the third quarter. The future zinc has changed to a near high and far low structure, and the spot premium has intensified, eventually opening the import window and pushing the CIF premium of imported zinc to its peak in recent years

1.3 key to 2018: low inventory

after entering 2018, the logic that once dominated the market, that is, the shortage of zinc resources (zinc concentrate zinc consumption) has subsided this year. With the gradual production of overseas zinc concentrate projects, the market has basically reached a consensus on the long-term supply recovery. However, due to the medium and short-term bottlenecks caused by smelting, the market is still in a state of low inventory. This extremely low inventory and the possibility of further destocking make it difficult for zinc prices to repeat the decline in the first half of the year; Moreover, due to the extremely low inventory, the marginal variable required to pry the market is smaller, and the market is more likely to stimulate extreme market

II. Continue to destock in 2019

thanks to the rise of zinc prices in the past two years, since 2018, overseas zinc concentrate projects have been gradually released and reached production. The market had previously predicted that there would be excess zinc ingots in 2019, that is, there would be excess zinc concentrate relative to zinc consumption, and on the premise that there was no bottleneck in the smelting process, smelting could be stimulated to convert zinc concentrate into zinc ingots by transferring profits from mines to smelting, and finally appeared in the form of excess zinc ingots

however, the experience in 2018 has led us to find that there are certain problems in smelting, which makes the smelting link unable to be fully released even when the profit is appropriate. Therefore, the change factor that affects the low inventory state is when the problem of limiting smelting capacity is solved. In addition, as the zinc price has recouped more than half of the increase, it is necessary to reassess the increment of the mine

2.1 under the background of zinc price after 50% compression, the actual increment of the mine

in 2018, after the sharp decline in the first half of the year, the zinc price has retrenched its increase of almost 50%. At the beginning of 2018, major institutions estimated that the global zinc concentrate supply increment in 2018 was approximately 10000 tons/year, but the actual increment was only around 300000 tons. It is worth mentioning that the estimation of supply (or the estimation of the balance sheet) is based on the current price, that is, the supply stimulated by the current price. The market adjusts the supply through the price. The supply corresponding to the current zinc price of $2500 is naturally not comparable to the supply stimulated by the price around $3000. Therefore, it is necessary to reorganize the increment of domestic and foreign mine projects

according to wood Mackenzie data, looking at the global zinc concentrate cost curve, only 0.5% of the mines are in the state of cash loss at $2500, while the zinc price of $2000 corresponds to 95% of the mines, which means that most of the mines in the world are in a very profitable State at present. It can be seen that when the zinc price fell back to $2500, there were few actual closures of existing mines due to losses

it is inferred from the reference cost curve that the existing mines do not have a strong desire to reduce production at the current price, so under the premise of the current price, the assumption of reduction of existing mines is not made

(I) overseas mines with considerable increment

next, through sorting out the projects of overseas enterprises one by one, re evaluate the supply increment of overseas zinc mines in the next three years

throughout the world, the increment of zinc concentrate in the next three years will mainly come from abroad. Based on the analysis of major overseas mining projects, it is found that overseas zinc concentrates will increase significantly in the next three years, especially in. The more prominent overseas projects in 2019 came from new century, MMG, Glencore, Vedanta, Hindustan zinc and other companies. These projects have increased more or less in 2018, and will further release production in the next two years

Glencore, which once prized the rise of zinc, announced at the end of 2017 that it would restart the lady Loretta project in 2018. However, due to the preparatory work, there was no substantive output in the first three quarters of this year, so the main incremental contribution will be reflected in 2019. Secondly, the production of Hindustan zinc has also been affected this year due to the shift of mining operations from the ground to the underground. With the progress of its underground operations, the production will also recover significantly next year. In addition, the production of its other two projects: sindesar khurd and Zawar mines will increase significantly next year. According to the production guidelines of mining enterprises, we predict that there will be an increase of 660000 tons of overseas zinc concentrate in 2019

the increment in 2020 is basically similar, and the main contribution still comes from the continued release of HZL's mining projects; Secondly, the production capacity of the new center is gradually reached, as well as the production capacity of the Neves Corvo project of Lundin mining. Finally, there are several small mining projects with more than 10000 tons that will be released in 2020. In terms of total volume, 570000 tons of increment will be achieved in 2020

finally, based on the current sorting of public data, there will be an increase of 270000 tons overseas in 2021

(II) domestic mines subject to environmental protection

in 2018, domestic zinc concentrate not only did not achieve an increase, but its output decreased year-on-year, mainly due to domestic environmental protection, mining rights and other administrative reasons. Last year, the project of burning clouds in large mines, which attracted the attention of the market, was shelved for a long time due to problems such as mining rights. In addition, the mines in Huayuan County, Hunan Province have not produced much zinc ore in the past year due to environmental protection problems. In addition, in terms of new mines this year, cuihongshan project and gorqi project reached production after the second quarter, and the progress was also weaker than expected. On the whole, the output of domestic zinc concentrate in 2018 is expected to decline by 100000 tons year-on-year

it is worth mentioning that the price of zinc has risen for two consecutive years. In this process, the market continues to expect domestic mines to have positive production power, thereby releasing more output. However, after two years, subject to the disturbance of administrative factors such as environmental protection, domestic zinc concentrates have little increment, which makes the market have to consider non-profit interference factors such as administration when estimating domestic increment

although, in the next three years, many domestic mines, including statistics, will increase production or put into production. However, environmental protection issues continue to interfere with the release of existing mine capacity, which makes it necessary to lower the expectation of actual production when estimating the future increment

from the perspective of next year's increment, most of it is the delay in the progress of new mines this year, which leads to increment (7) the preservation and printing of experimental results will be reflected next year, such as yinman mining, Golgi, etc; In addition, due to the mine rectification in Western Hunan this year, it is expected that the rectification will be completed next year and then the increment will be provided. Under comprehensive consideration, it is estimated that the domestic mining increment in 2019 will be 160000 tons

in 2020, most of the increment lies in the continuous release of the capacity of the built projects, and the most prominent increment during this period is the continuous release after the completion of the rectification of mines in Western Hunan; Secondly, Yubang mining and Yufeng mining in Inner Mongolia have output in 2020. Here, it is estimated that the domestic concentrate will increase by 150000 tons in 2020 and 100000 tons in 2021

in the next three years, the incremental projects of zinc concentrate are considerable, and the increment is mainly contributed by overseas; Although there will be an increase of more than 500000 tons in the next three years, there is uncertainty about the successful production

2.2 smelting problems plagued the market

in 2018, global mines increased production, resulting in a rise in processing fees; However, the zinc ingot sector unexpectedly failed to increase production, which enabled the zinc ingot Market to go deep into inventory during the year

from the perspective of regions, the output of overseas zinc ingots increased steadily, and the region with unsatisfactory growth was mainly India, which was subject to the decline in concentrate output caused by the conversion of mining from ground to underground in HZL's mines, which affected its smelting output

China's smelting output fell significantly year-on-year this year. The main reasons are, on the one hand, the phased production losses caused by the rapid decline in prices in the first half of the year, but the more serious reasons are non profit reasons such as environmental protection, which interfere with the release of smelting capacity

according to the above global zinc concentrate cost curve, the current zinc price is still quite profitable for the mine, and the mine

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