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Will Suppressed Zinc Demand Be Releaseor Disappear Once foAl

2022-06-08 09:48

Will Suppressed Zinc Demand Be Released or Disappear Once for All Following the End of COVID Lockdown in Shanghai?

Will Suppressed Zinc Demand Be Released or Disappear Once for All Following the End of COVID Lockdown in Shanghai?

And in light of restricted port trade, some of the orders from European countries and the US have flowed to other countries like Southeast Asia, which, unfortunately, may never be retrieved.

SHANGHAI, Jun 7 (SMM) - Since March 2022, downstream consumption has been significantly impacted by the goal of dynamic zero-COVID, with which Shanghai has been locked down for a full two months and only resumed work and production on June 1. During this period, downstream processing enterprises were affected by rising raw material prices, freight costs, labour shortages as well as the supply chain crisis. The overall operating rates have been quite disappointing. However, after Shanghai is fully released from COVID lockdown, will the orders that disappeared during the pandemic resurface or disappear forever?

From the distribution of zinc downstream enterprises, they are mostly located in east and north China, which account for up to 70% of the total. In terms of the outbreak of the pandemic, both the Shanghai-centred east China market and the Tianjin-centred north China market suffered significantly from the impact of the pandemic, leading to a greater impact on the broad downstream market.

According to SMM research, most companies are relatively pessimistic about the subsequent market. In the galvanising market, although the production of galvanised sheet (strip) remained relatively stable, stocks of finished products kept piling up mainly for two reasons.

1. Falling export orders: In the face of global economic downside risks, the overall demand in overseas markets weakened. And as overseas enterprises gradually resume work and production, the robust export market saw last year has almost disappeared. Therefore, Chinas galvanised sheet exports show a downward trend, and the proportion of exports in domestic production fell from 40% to some 30% recently.

2. Shrinking domestic demand: As a result of the overall downturn in the real estate industry, the previously outstanding year-on-year growth rate of new housing completions has slumped to nearly 0%, while the readings like operating rates and home sales also performed relatively poorly. In addition, due to the restructuring of the auto industry, Chinas auto production and sales also failed to post an improvement. That is, domestic zinc consumption continued to weaken significantly.

The first quarter of 2022 saw a year-on-year decline in home appliance production, which got off to a slightly unfavourable start of the year due to the pandemic and other factors. With domestic sales in the doldrums, export orders were likewise down year-on-year due to the impact of overseas companies resuming work and production.

And the severe pandemic has suppressed domestic consuming willingness amid the traditional seasonal high in the home appliance industry in April, and the orders disappeared during this period has forever disappeared even after the COVID lockdown was lifted.

Currently speaking, the introduction of policies such as the green home appliance subsidy in many parts of China, combined with the 618 online shopping festival and other activities, will boost the consumption to a certain extent.

Similarly, the general life span of home appliances is about 10 years, and a new round of home appliance replacement based on the last round of home appliances promotion in the countryside will also contribute some of the growth. However, due to the sluggish new housing completion, Chinas home appliance industry could hardly post any surprises in the long run.

As a result of the local outbreak of the pandemic in Shanghai, the downstream consumption in China has been extensively impacted. Based on the data, most of the downstream enterprises maintained poorer operating rates than last year, which is close to the low seen at the beginning of the first COVID breakout in China. High raw material prices, logistics and transportation difficulties and rising transport costs have led to a lack of confidence in market consumption, causing market demand to shrink rapidly.

However, with the order of full resumption of work and production in Shanghai on June 1, the demand will be partly released. But on the other hand, Shanghai, as the countrys most important trade hub, has cast an influence to the enterprises across the country to varying degrees due to the two-month-long lockdown. And in light of restricted port trade, some of the orders from European countries and the US have flowed to other countries like Southeast Asia, which, unfortunately, may never be retrieved.

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