JOHANNESBURG (miningweekly.com) – An ore shortage will see the global refined zinc deficit gradually widen over the next few years, with producers to curb output, research firm BMI said on Tuesday.
It noted that zinc production and consumption growth are expected to average 1.9% and 1.7% respectively between this year and 2021, while the global stocks-to-use ration will narrow considerably from 9.2% this year, to 1.8% in 2021.
“Zinc refiners, particularly those in China, will scramble to secure zinc concentrate over the coming quarters on the back of production curtailments implemented in 2016 and two key mines coming offline permanently.
“Over the long term, the re-emergence of China's metal demand deceleration will keep global zinc demand growth muted, albeit steady,” BMI pointed out.
However, given Chinese smelters' reliance on imported zinc ore, producers with low-cost domestic zinc mines will fare better over the coming quarters as prices continue to climb, BMI stated.
In 2016, Zijin Mining, which owns the second-largest lead-zinc mine in China, reported a notable jump in refinery zinc gross profit margins to 12.9%, compared with 3.2% in the previous year.
Meanwhile, India has been identified as a bright spot for zinc production, with its largest producer Hindustan Zinc Limited (HZL) continuing to ramp up output. This was further supported by declining operating costs and India's strong economic growth.
In the first quarter of this year, India's production increased by 44.5% year-on-year to 222 000 t. Both HZL and parent firm Vedanta Resources will boost spending on zinc projects in 2017, driving production growth.
BMI expected this upward trajectory to continue, forecasting that the country’s zinc production would outperform peers and average 6.5% growth a year for the next four years.
Consumption is also expected to increase from 616 000 t to 745 000 t by 2021.