What drives the price linkage between zinc metal and downstream zinc oxide?

What drives the price linkage between zinc metal and downstream zinc oxide?
Zinc oxide price trends track Shanghai zinc futures closely, especially for indirect-process material made from zinc ingots, where feedstock accounts for over 80% of production cost. However, the correlation weakens for major downstream sectors like galvanized steel sheet. In galvanized sheet cost structure, electrolytic zinc represents only about 3% of total cost, with cold-rolled coil dominating at roughly 90%. A 1,000 yuan per ton swing in zinc price shifts galvanized sheet cost by only about 30 yuan, muting pass-through. By contrast, zinc oxide producers face direct input cost pressure, so their quotes respond almost one-for-one to zinc ingot movements. This divergence means monitoring zinc oxide prices offers a cleaner read on zinc metal cost transmission than watching galvanized sheet.