In a report published this week, Fitch Solutions company BMI revised downward its average zinc price forecast for this year from $3 000/t to $2 550/t.

This implies an average price of about $2 275/t from June to December this year.

Further, BMI also reports that zinc demand in Mainland China will likely slow over the period from June to December owing to curbs on steel production. Steel production in the country will need to contract year-on-year from June to December in order to meet the government's target for the year as a whole.

“Looking beyond 2023, our long-term view on zinc prices remains negative, and we have revised down our average price forecasts. We now forecast a steeper downtrend in zinc prices to average $2 150/t from 2024 to 2027, compared to our previous forecast of $2 500/t,” BMI adds.

GLOBAL PRODUCTION, CONSUMPTION

BMI also expects the global yearly zinc market deficit to disappear this year as the global supply rebound outpaces the recovery in demand. Compared with a yearly deficit of 184 000 t in 2022, BMI forecasts a small surplus of 7 000 t this year.

BMI also notes that global supply will remain tight this year owing to low London Metal Exchange stockpiles, following significant yearly production deficits in 2021 and 2022.

“There are tentative signs that European smelters could begin increasing production again this year. In February, metals and minerals producer Nyrstar restarted production at the firm's Auby plant in France, having previously been placed on care and maintanence last year owing to high power costs”.

BMI points out that in October last year, diversified miner Glencore announced the closure of the Nordenham zinc smelter, which was the third major European zinc smelter to be closed from 2021 to 2022 owing to high energy costs.

Glencore’s 100 000 t/y Portovesme smelter in Italy curtailed production at the end of 2021, while Nyrstar placed the Budel zinc smelter under care and maintenance last September.

Further, weaker global demand growth will create persistent yearly production surpluses over the remainder of the decade, stresses BMI.

BMI forecasts that global zinc mine production will grow by around 1% to 2% yearly over the next decade and surpass the previous high set in 2013. The pace of growth will be constrained by declining zinc prices over the period, which will result in delayed and cancelled zinc mine investment plans.

“While modest, this pace of zinc mine production growth would be stronger than the 2013 to 2022 yearly average of just 0.2%. Global zinc mine output declined by almost 10% from 2014 to 2017 and production has steadily recovered since”.

BMI also states that Australia, India and the US will drive zinc mine production growth, which is underpinned by a raft of projects in the pipeline.

In contrast, population growth in the world’s two largest zinc mining geographies, Mainland China and Perui, will be weak over the coming decade.