The right commodity, the right time, the right place
Zinc is the fourth most commonly used metal worldwide after iron, aluminium and copper. Its strong anti-corrosive properties and ability to bond well with other metals make it an important industrial metal – with demand growth accelerating in recent decades as a result of booming construction markets.
About half of all zinc produced is used in zinc galvanising, which is the process of adding thin layers of zinc to iron or steel to prevent rusting. The next major use of zinc is an alloy – when combined with copper to form brass and with other metals to form materials that are used in automobiles, electrical components and household fixtures.
Another key use of zinc is in the production of zinc oxide, which is used in rubber manufacturing and as a protective skin ointment. Zinc also has important health uses as it is an essential element for the growth and development of humans, animals and plants.
The human body contains between 2 and 3 grams of zinc, which is the amount needed for the body’s enzymes and immune system to function properly. A variety of zinc compounds such as zinc carbonate and zinc gluconate are used as dietary supplements, while zinc chloride is used in deodorants, zinc pyrithione is used in anti-dandruff shampoos and zinc sulphide is used in luminescent paints.
Lead is generally mined as a by-product of zinc, is highly recycled and is critical to the global vehicle and industrial battery industries. It has several properties that make it advantageous to use, including high density, low melting point, ductility and relative inertness against oxygen attack.
Lead is widely used in building construction, in the production of lead-acid batteries, bullets and shot, weights, as part of solders, pewters, fusible alloys and as a radiation shield.
While the zinc market is highly influenced by the strength of the global economy, lead is more resilient due to the replacement battery market.
Zinc Market Outlook
Zinc has been one of the strongest performing commodities of 2016, and was the best performer among 22 raw materials on the Bloomberg Commodity Index with the price rallying by 80 per cent from its 2015 lows.
The zinc market is forecast to be in deficit through until at least 2019, with very large deficits forecast for the next two years.
This is due a combination of strong forecast demand growth of more than 5 per cent per annum for the next five years – underpinned by continued growth in the Chinese steel sector and the trend towards value-added steels – and a continued tightening of supply following recent and impending closure of several major global mines.
The closures of the Century mine in Australia and the Lisheen mine in Ireland alone (which closed in 2015 after 17 years of production) have removed 600-700,000tpa of supply from the market.
Upcoming Major Zinc Mine Closures
|Name||Amount in Tonnes|
|Century||500,000 (CLOSING IMMINENTLY)|
|Brunswick||200,000 (JUST CLOSED)|
|Lisheen||167.000 (JUST CLOSED)|
|Perseverance||128,000 (CLOSING NOW)|
|Total||1.7 Million Tonnes (11% of supply)|
As a result of these mine closures, as well as a decision by global producer Glencore to scale back production amidst weak commodity prices, zinc stockpiles tracked by the London Metal Exchange (LME) are currently at 12-year lows.
The zinc demand forecast has also been buoyed by recent large-scale infrastructure spending announcements from both the Chinese and US governments.
Zinc is also experiencing increasing demand within the renewable energy sector as a vital input for zinc bromine batteries, which are emerging as an effective solution for large-scale green power storage.
Based on these supply-demand fundamentals, the Company believes that zinc offers an exceptionally strong opportunity for long-term growth with many analysts forecasting that an additional 3.0-3.5 million tonnes of zinc will be needed for the next 5 years to meet forecast demand and balance the current deficit.