Zinc surplus this year is for a 300,000-ton production
The consensus of many analysts coming into this year is that zinc is on course to register a second year of significant supply surplus. ILZSG forecast a massive 367,000-ton global glut when it met in October. The expectation in January was for a 300,000-ton surplus. Not one of the 11 analysts offering a supply-demand balance forecast expected anything other than too much metal.
Such is the tightening in the zinc concentrates segment of the market, however, that expectations are being adjusted. Analysts at Macquarie Bank, for example, are now projecting a small 61,000-ton supply deficit over the year.
“Given the very tight concentrates market, we have reduced our global refined production forecast to -0.4% this year,” the bank said in its March quarterly “Commodities Compendium”.
Western production is expected to remain challenged and Chinese production growth is likely to brake sharply to just 0.5% due to a lack of feed.
Several Chinese smelters have already brought forward maintenance or trimmed run-rates in reaction to the margin compression caused by low treatment fees, which account for around 40% of a typical smelter’s profits, according to Macquarie.
The bank expects a return to surplus next year but it could be a bumpy price ride since this year’s zinc narrative has already taken a very unexpected turn.
