SHANGHAI, Oct 21 (SMM) - In the end of third quarter, thanks to the policy of "guaranteeing the delivery of buildings" and the development of domestic new energy vehicles, orders for window frames, handles, and auto parts improved slightly. Although the number of orders was small, manufacturers in south China and east China still benefit from it, and thus the average operating rate of die-casting zinc alloy manufacturers improved. However, there was a division in conversion margins of die-casting zinc alloy. On the one hand, some die-casting plants wanted to take the opportunities of the peak season and increase the operating rates so as to make up for the meagre profits in the previous three quarters. Therefore, to obtain stable orders, these plants lowered conversion margins to improve price competitiveness. On the other hand, some enterprises stayed firm to their conversion margins and relied on regular customers and high-quality raw materials to secure stable production. The conversion margins were 100-600 yuan/mt for 3# zinc alloy in the market.
So far, the price gap between zinc and aluminium has been stable, but there have been occasional declines in aluminium prices. Therefore, die-casting zinc alloy enterprises might see a slight increase in profits from the widening price gap. Precision Components
In October, the SHFE/LME zinc price ratio has remained high as domestic market constantly outperformed the overseas. The TCs for domestic zinc concentrates kept moving up under the pressure of continuous inflow of imported zinc concentrates. The rising profits of smelters stimulated more domestic smelters to resume the production. Meanwhile, with the temperature falling in October, the apparent consumption of refined zinc declined as galvanising and other downstream sectors entered the traditional low season. The sufficient supply of refined zinc failed to provide strong support for die-casting zinc alloy prices. The raw materials prices faced downward pressure amid oversupply, which might lead to die-casting zinc alloy prices falling as well.
On the consumer side, judging from the comparable months in previous years, domestic and overseas orders usually hardly improve significantly in the fourth quarter, and the market this year has been sluggish. Therefore, the die-casting zinc alloy sector might enter its annual low season in the fourth quarter. At the same time, under the pressure of sluggish orders, some die-casting zinc alloy producers might continue to lower the conversion margins to maintain production and secure the capital chain. On the whole, the die-casting zinc alloy prices are very likely to drop in October amid falling zinc prices and expectations for lower conversion margins.
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