In December, zinc prices fluctuated and rose, and the zinc market rose. As of December 31, the price of zinc was RMB 24,222/ton, up from RMB 23,078/ton on December 1 at the beginning of the month, an increase of 4.96%. In December, the price of zinc resumed its rise and hit a new monthly high in the second half of the year.

　　The impact of the epidemic is less than expected to benefit the zinc marketAnthony Fauci, director of the National Institute of Allergy and Infectious Diseases and chief medical adviser to the White House, stated on December 5 that the Omi Keron mutant strain is not as bad as initially feared. The epidemic is lower than expected, and the restart of the economy stimulates demand in the zinc market, which is positive for the zinc market.European energy crisis triggered a wave of zinc smelting shutdownsEDF announced on December 15, 2021 that it will shut down its two reactors at the Chooz nuclear power plant, while the two reactors of the Civaux nuclear power plant will be shut down for a long time. At this time, the European continent is experiencing cold current and the natural gas stocks are exhausted. The shutdown of the French nuclear power plant will make the electricity market more tense. On the European Energy Exchange, the price of electricity supply in Germany next year will therefore jump by more than 10%, and the price of electricity in Germany will jump to 230 euros per MWh in 2022. French electricity prices surged 20% to 485 euros in the previous week’s trading, while the January contract price soared 40% to a record 550 euros. The soaring electricity price is obviously bad for the non-ferrous smelting market, and the non-ferrous smelting enterprises are affected by this, reducing production and limiting production, and the supply of the zinc market is expected to decrease in the future.

　　Nyrstar, one of the world’s largest zinc smelting companies, stated on December 16 that in response to the soaring electricity prices in France, the maintenance plan for its French Auby zinc project has been advanced to the first week of January 2022. Nyrstar, a global metal mining company, is the world’s leading producer of zinc and lead. Nyrstar’s zinc production capacity in Europe is 720,000 tons/year. Zinc smelters in Europe ceased production again, and zinc prices increased.On December 21, the prices of natural gas futures in continental Europe and the United Kingdom both rose more than 20%, setting a record closing high. The surge in natural gas prices was followed by rising electricity prices in Europe. At present, the average price of electricity in most European countries has exceeded 300 euros/MWh. In the same period of 2019, the electricity price in Europe was 25-50 euros per MWh. High operating costs have forced many metal smelting companies to cut production or even temporarily close their factories. The decline in zinc smelting output has stimulated the continuous rise of zinc prices.

　　Increased domestic downstream shutdowns

　　Affected by various reasons such as environmental protection and the Winter Olympics during the Spring Festival holiday, many galvanizing plants and zinc oxide companies in Hebei have already made holiday plans in December. The Hebei galvanizing plant has been affected by the introduction of relevant policies for the Winter Olympics. Most companies will start to arrange vacations in January, and production may even be suspended until March 8, 2022. In addition, the downstream sentiment of receiving goods at the end of the year is not high, downstream demand is weak, many companies have almost no orders, traders continue to accumulate inventory, and the demand for zinc ingots weakens.

　　Market outlook forecast

　　In December, the domestic zinc market demand weakened, which was negative for the zinc market. However, the impact of the European energy crisis caused European electricity prices to rise sharply. In addition, the unexpected shutdown of French nuclear power plants intensified European electricity prices soaring. European zinc smelters were unable to withstand cost pressures. The expected reduction in zinc supply in the zinc market stimulates the increase in zinc prices. In general, both supply and demand in the zinc market continued to be weak in December, but the reduction in production by European zinc companies resulted in a greater-than-expected reduction in supply, and zinc prices rose. In the future, European zinc companies have further expanded the risk of reducing production. After the epidemic, the economy slowly recovers. The zinc market demand is expected to rise slowly, and the price of zinc is expected to fluctuate in the future.Related listed companies: Zhongjin Lingnan (000060), Chihong Zinc Germanium (600497).