SHANGHAI, Sep 7 (SMM) - In the third quarter, the average operating rate of die-casting zinc alloy plants continued to stay low at 46.19%, and had once dropped to as low as 30%. Therefore, the die-casting zinc alloy sector became one of three most sluggish downstream sectors in the zinc industry chain. Yet, as of September 4, the weekly average operating rate jumped to 51.25%. The boom in the operation seems to mark the beginning of the traditional peak season in September and October. So, will die-casting zinc alloy sector usher in significant recovery in September after months of slump? The SMM analysis shows that the answer is no.

First, the actual orders are not sustainable. Generally speaking, the die-casting zinc alloy sector is sensitive to the change in zinc price as the proportion of zinc content to its raw material exceeds 94%. In the same period of the previous years, the decline in zinc prices usually boosted the operating rates of die-casting zinc alloy plants. This can be reflected in the change of operating rates in late August, when zinc prices slumped due to supply shortage, die-casting zinc alloy plants purchased on dips, and the plants that had suspended or cut the production resumed and stepped up the production. However, it should be pointed out that terminal manufacturers still received few orders, and their purchase of zinc alloy was so limited that no rising trend could be detected. Therefore, the lift in the operating rates of die-casting zinc alloy plants in early September did not imply growing terminal demand, and the poor sustainability will remain in orders.

Second, the resurgence of pandemic has brought about negative impacts in many places. Recently, the pandemic made a comeback in many places domestically. As a result, the transportation was hindered and the market confidence dampened, though the impact of this round was less severe than that in the first half year. Various financial policies were introduced with a tremendous amount of M0, but the enterprise loans saw rare increase in the medium and long run.

Third, the overseas orders were extremely for the Christmas holiday restocking. In the same period of the previous years, the overseas demand was high in Europe and the United States for related productions to celebrate the Christmas, which helped push up the operating rates of die-casting zinc alloy plants in the third quarter. However, almost no demand was heard this year due to high energy prices and pandemic impacts overseas. 

Considering the consumption will hardly see any improvement both at home and abroad, SMM expects that the die-casting zinc alloy sector will not usher in significant recovery.

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