Glencore: Zinc driven by strong recovery in global demand

The zinc market recorded a deficit in 2021, driven by strong recovery in global demand (+6%), combined with production disruptions and supply chain bottlenecks. Zinc price, metal premiums, market backwardation, concentrates spot TCs and metal exchange inventory levels all signalled tight market conditions at year end.

Average zinc prices increased 32% from$2,269/t in 2020 to $3,005/t in 2021, closing the year at around $3,600/t. Metal premiums were particularly strong outside China (Q4 2021: USA >$300/mt and EU c.$250/mt). At thesame time, China required a significant amount of metal, with China’s State ReservesBureau (SRB) releasing 180kt in 2021. At year-end, stocks remained at low levels, bothin visible metal (~350kt or c.10 days of global consumption) and concentrates (only c.4 daysabove typical smelter requirements of 30days).

Mine supply ex-China is estimated to havegrown c.0.5mt–0.6mt, missing higherpredictions earlier in the year. Thecontinuation in mine disruptions erodedconcentrates spot TCs, which dropped byc. $100/dmt to $78/dmt on average in 2021.

The energy price environment in Europe,where c.2.3mt p.a. of zinc metal is produced (c.17% of global supply), poses risk of furthermetal production cutbacks in the region.

Should these materialise, both zinc price andpremiums could rise as there is no SRB parallel in the EU/US to ease the market.

Looking ahead into 2022, refined zinc consumption is expected to increase, albeit not matching the percentage increase in 2021.

There are risks to demand, including any Chinese construction slowdown and/or power-related demand destruction in Europe, however, there is upside from the potential comeback of the automotive sector as semiconductor shortages recede.

Bottlenecks in logistics are expected to continue in the short and medium-term, creating regional differences.Regional differences and supply disruptionswere also evident in the lead market. LMEstocks reduced c.60% since December 2020and the average price increased by 20% year-over-year to $2,204/t.

Glencore’s own sourced zinc production of 1,117,800 tonnes was 52,600 tonnes (4%) lower than

2020, mainly reflecting: (i) the expected decline of Maleevsky mine in Kazakhstan, being lagged by the slower than expected ramp-up of replacement Zhairem mine tonnage (19,600 tonnes); (ii) Mount Isa producing additional metal from ore stockpile drawdowns in the base period (24,400tonnes); and (iii) Kidd lower grades (13,800tonnes). These factors were partly offset by stronger zinc production at Antamina, which was suspended for part of 2020 due to Covid restrictions.


Own sourced zinc production of 147,900tonnes was 19,600 tonnes (12%) lower than2020, reflecting expected lower grades from Maleevsky mine (also affecting lead and copper noted below). Own sourced lead production of 19,800tonnes was 5,800 tonnes (23%) lower than2020, and own sourced copper production of25,600 tonnes was 11,400 tonnes (31%) down, also due to Maleevsky’s progressive depletion.

Own sourced gold production of 595,000ounces was 64,000 ounces (10%) lower than the comparable 2020 period, mainly reflecting expected lower grades a Vasilkovsky. The new Zhairem zinc/lead mine was commissioned in May 2021, with ramp up through 2022 and steady-state annualised production expected by 2023.


Zinc production of 609,400 tonnes was 24,100tonnes (4%) lower than 2020, mainly reflecting

Mount Isa processing additional metal from ore stockpile drawdowns in 2020. Lead production of 188,100 tonnes was 28,700tonnes (13%) down on 2020 reflecting lower Mount Isa grades.

The Mount Isa copper operations are now reported within the Zinc business unit. Own sourced copper production of 91,500 tonnes was broadly in line with 2020, noting that this figure excludes units from the held-for-sale Ernest Henry mine.


Zinc production of 96,100 tonnes was 18,600tonnes (16%) lower than 2020, reflecting the reducing production profile of both assets as they approach end of mine life.


Zinc production of 110,700 tonnes was 1,600tonnes below 2020 mainly reflecting the planned cessation of mining at Aguilar(Argentina) and Iscaycruz (Peru), partly offset by higher production in Bolivia following Covid-related suspensions in 2020.


Zinc metal production of 800,600 tonnes was modestly higher than 2020. Lead metal production of 244,900 tonnes was46,900 tonnes (24%) higher than 2020, mainly reflecting the contribution of the Nordenham Metall lead smelter that was acquired in September 2021 (38,200 tonnes).

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