CRU’s Zinc Team operates out of offices across the globe, with analysts in London, Singapore, Beijing and Sydney.
We follow everything from mine supply and costs to refined output and demand, to develop our view of the zinc market. Below, we pick out 10 key market themes for 2021.
Global economic recovery
The speed of the Covid-19 vaccine rollout, massive stimulus, and China’s 14th FYP will all contribute to the global economic recovery in 2021. Zinc demand expectations: China +2.9% (up from flat), ex-China +7.4% (up from -8.5%).
Refined market surplus
The slump in ex-China demand in 2020 led to a ~500,000 t refined metal surplus. Targeted infrastructure stimulus in China and elsewhere will drive the demand recovery in 2021 but the refined market will register a second year of surplus.
China’s scrap imports ban
The 1 January 2021 import ban on zinc scrap will lift refined zinc demand in the diecasting and chemical sectors. But high-quality secondary brass can now be imported without restriction and this will displace some refined zinc consumption in the brass sector.
Smelters face lower TCs
Spot TCs slumped from $305/t to $85/t in 2020 on Covid-19-related concentrate tightness. Tightness through 2021 H1 is expected to exert downward pressure on the 2021 benchmark TC, which will impact smelter profitability.
Covid-19 has given fresh impetus to the transition to sustainable energy sources. The EU’s Green Deal and China’s net-zero carbon pledge is likely to boost zinc use in wind, solar & utility-scale batteries.
China’s Green Mine standards
China’s new Green Mine standards will lead to further industry consolidation. Capex and opex will increase as higher standards are introduced in terms of mining and processing, automation, energy consumption & environmental protection.
2nd wave of Covid-19 disrupts ex-China mine supply
The expected large increase in mine supply in 2020 did not materialise due to Covid-19 disruption and price-induced cutbacks. We expect mine output of +7.5%, following last year’s contraction of -2.8%, but isolated closures due to Covid-19 cannot be ruled out for 2021.
Elections in Peru cause supply disruptions
Covid-19 lockdowns brought political instability to Peru in 2020. The general election in April 2021 could result in a fragmented congress, bringing more protests and further disruption to zinc supply at operations which are already struggling.
Investor pressure will keep ESG issues such as community relations, emissions, product quality and traceability, and water usage in focus this year, as will the roll out of the LME passport as part of its sustainability strategy.
Ongoing zinc price support
Risk-on investor sentiment and $ weakness has boosted zinc’s price. We expect ongoing support well above the 90th percentile cash cost for miners of $2,100/t, despite another year of refined surplus.
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