The Global Zinc Market Faces a Sizeable Supply Deficit in 2024
Due to the tightening of raw materials forcing smelters to reduce refined metal output, the global zinc market is facing a significant supply shortage in 2024. Since the last meeting in April, the International Lead and Zinc Study Group (ILZSG) has substantially revised its assessment of zinc market dynamics. The previously anticipated surplus of 56,000 metric tons has been updated to a shortage of 164,000 metric tons. It is now expected that mine production will decline for the third consecutive year, and the processing conditions for smelters (a good indicator of raw material availability) have turned negative.
China, which has the world’s largest network of smelters, is feeling profit pressure, and the country’s refined zinc output is accelerating its decline. Back in April, the ILZSG had projected a year-on-year increase of 0.7% in mine output for 2024. Just five months later, that forecast has been significantly downgraded, with current expectations of a 1.4% decrease in mine zinc production, bringing it down to 12.06 million tons.
This will mark the third consecutive year of declining output, and the anticipated production in 2024 is expected to be 5.7% lower than in 2021, the last year of a zinc mining boom.
The low zinc prices in 2023 have severely impacted high-cost operators, particularly in Europe, where the closures of the Tara mine in Ireland and the Aljustrel mine in Portugal are expected to lead to an 11.4% decline in output for the region this year.
Over time, the pressure on smelter profit margins has intensified. In August, spot processing fees for imported zinc concentrates in China fell into negative territory for the first time and have continued to decline. Even before top producers in China met in August to decide on reducing operating rates, the country’s refined metal output had already started to drop.
The ILZSG forecasts that China’s annual output will decrease by 3.4% compared to 2023, resulting in a global production decline of 1.8%. This marks a stark contrast to April, when the organization projected refined output would increase by 0.6%.
In 2024, China’s demand for zinc is expected to grow by only 0.7%. Galvanized steel, widely used in construction, is the most significant end-use sector for zinc, accounting for 60% of total demand, and China has been the world’s most active builder over the past decade.
Will there be a recovery next year?
The ILZSG predicts that after this year’s supply shortages due to rising zinc prices, there will be a substantial surplus of 148,000 tons in 2025. An improved price environment should encourage a resurgence in production. Swedish producer Boliden has already announced the restart of the Tara mine in Ireland.
The ILZSG expects that improvements in concentrate supply will drive global refined zinc output to rise by 3.9% year-on-year, restoring a supply surplus. As indicated by the revisions from ILZSG since April, the supply dynamics for zinc are currently highly unstable, and this state is likely to persist for some time.
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