Research agency BMI maintains a lower price forecast for zinc this year, at $2 500/t, compared with the yearly average price of $2 651/t in 2023, as excess market supply drags prices.

BMI says an uncertain growth outlook for Mainland China and other major markets will limit price growth of this commodity.

The year will see a wider global market zinc surplus than in 2023, while the weakening of the US dollar later in 2024 will help offset prices to some extent.

Beyond 2024, BMI expects zinc prices to average $2 560/y until 2028.

On the supply side, Mainland China's refined zinc production growth is poised to slow this year. As the world's leading producer of refined zinc, shifts in Mainland Chinese production play a pivotal role on the global stage, with the country poised to account for an estimated 49% of global refined zinc production this year.

BMI believes Mainland Chinese production growth of 4.5% this year will not come close to the 7.5% growth in 2023, which was amplified by low base effects following a contraction in 2022.

“Accordingly, we forecast that global refined zinc production will increase by a more modest 2.8% in 2024, which is less than the growth of 6.3% that was expected in 2023.”

Outside Mainland China, the anticipated resumption of Glencore's Nordenham smelter and the completion of the Odda expansion later in the year are set to bolster global zinc production growth.

Nonetheless, there are factors that could offer support to prices.

The Youngpoong Seokpo zinc smelter in South Korea, for example, which is currently operating at 80% of its 400 000-t capacity following an incident in December 2023, is a substantial contributor to global production and may offer support to prices throughout the year if production remains subdued.

DEMAND

BMI explains Mainland Chinese zinc demand growth is also expected to slow this year, compared with last year. It predicts a 1.8% increase in demand this year, following an estimated 8.1% increase in demand last year.

Mainland China became a net importer of zinc in 2023, having increased imports by 380% compared with 2022 and following an 89% decrease in exports over the same period.

This reflects a significant shift in trade dynamics, as Mainland Chinese zinc imports declined by 82% in 2021, while exports rose by 1 416% - from 5 300 t in 2021 to 80 900 t in 2022.

Moreover, Mainland China’s property sector continues to grapple with challenges and zinc prices are heavily influenced by the country’s property sector.

Investment in the real estate sector, and thereby in galvanised steel production that uses zinc, declined by 9.6% year-on-year in 2023, while new construction floor starts decreased by 20.4% year-on-year in 2023.

BMI expects this downturn to last a few years.

Zinc prices may see support from a modest 2% uptick in global steel production this year; however, this will only help control the extent of price losses and will not be enough to reverse the market surplus.

OUTLOOK

Overall, BMI predicts that the yearly production surplus will peak at about 769 000 t in 2027, which will place persistent downward pressure on prices.

BMI states that rising zinc inventories will continue to limit price increases. Inventories rose from 81 000 t in February 2023 to 239 700 t in February this year.

China’s weaker zinc imports, as a result of lower demand for galvanised steel, will be the main driver of lower global zinc demand in coming years.