The United Nations has labelled zinc a “life-saving commodity”, claiming that 200,000 childhood deaths could be prevented every year with increased access to zinc.
Zinc has also recently been included on the critical minerals lists for a number of nations, with a growing recognition of its importance in what has been termed the “new energy equation”.
Currently, with a US$40B-per-year market, zinc is the fourth-most used metal worldwide – behind iron, aluminium, and copper.
However, most market analysts are forecasting potentially significant production shortfalls over the next few years.
In some quarters, zinc is considered the secret base metal that is critical to reaching net-zero carbon emission targets. But recent zinc inventories have dropped dramatically.
The essential metal is used to make more efficient solar panels and smaller and lighter batteries, which is causing demand to increase while simultaneously the supply chain is getting crunched. Demand for zinc is expected to triple by 2030 as net-zero targets come into effect.
Analysts are identifying zinc premiums at record highs as physical zinc becomes harder to come by, causing a perfect storm for a bull market.
According to the International Lead and Zinc Study Group (ILZSG), zinc and lead are the two most widely used non-ferrous metals after aluminium and copper and are vital materials in everyday life.
Zinc production is varied, with more than 50 countries producing the mineral around the world.
Among the top producers are Canada, Australia, China, Peru and the United States. The vast majority of zinc is mined underground, with just 8% of the resource unearthed from open-pit mining techniques.
Zinc, mainly used to galvanize steel, has not received the same level of attention from the burgeoning battery sector as other metals such as nickel, cobalt and lithium, which are favoured in electric vehicle (EV) batteries.
However, in recent times zinc has been identified as a key component for new energy products, from solar cells to sunscreens, with new scientific studies opening up significant potential for its use in rechargeable batteries and EVs.
According to the International Zinc Association (IZA), the use of zinc in the rechargeable battery sector is set to grow exponentially this decade with the buildout of energy storage to ensure electricity supply.
IZA recently launched its Zinc Battery Initiative, touting the benefits of non-flammable zinc batteries over lithium-ion batteries in aviation and marine applications.
The Association says annual demand for zinc in batteries was only 600 tonnes in 2020 but that figure is projected to rise to 77,500 tonnes in 2030.
The IZA sees the stationary battery market share of zinc batteries climbing from just 1% last year to 5% in 2025 and 20% in 2030.
However, while all forecasts point to significant demand growth, there are a number of researchers raising concerns about supply issues.
The ILZSG recently said that it continues to anticipate global demand for refined zinc metal will exceed supply in 2022, with the extent of the deficit currently forecast at 292,000 tonnes.
Meanwhile, S&P Global Market Intelligence said a zinc market constricted by high energy prices and war is setting the stage for nickel-like market shocks.
S&P Global Market Intelligence recently claimed high power and natural gas prices, sparked by the Russian invasion of Ukraine, have idled some zinc production in Europe, the region responsible for one-fifth of refined zinc supply. Scarcity of available zinc, which is heavily used by automobile and construction sectors, has pushed up prices and catalysed massive stock drawdowns, potentially exposing the London Metal Exchange (LME) to another round of volatility.
The LME three-month zinc price climbed to US$4,136 per tonne on 8 March 2022, reaching highs not recorded in 15 years. The LME three-month zinc price closed 11 April at US$4,305 per tonne, far above the US$3,645 per tonne on 9 February.
According to S&P Global Market Intelligence forecasts this could mean that the world could face a 321,000-tonne zinc deficit in 2022.
The research firm said similar fears of limited nickel supplies sent nickel prices skyward in the days after the invasion. A short seller trying to cover its bets in March drove a historic price run-up, triggering the LME to suspend trading of its nickel contract. Though a suspension of the LME zinc contract appears unlikely, zinc’s grim supply and pricing outlook could be a big headache for consumers, including carmakers, already struggling to meet their raw material needs, industry analysts said.
“After the nickel debacle, the LME is much more sensitive to market tightness and positions, and they will look to move early to avoid a repeat,” said Stuart Burns, founder and editor-at-large at MetalMiner, a metal pricing and analysis platform. “But even so, zinc prices are looking strongly bullish, and the stage is set for a potential run-up in prices over the coming couple of months.”
Meanwhile, Australia’s chief economist recently reported that the LME zinc spot price is forecast to average around US$3,600 per tonne in 2022, with robust global construction activity expected this year, as well as continued refined supply shortages (particularly in Europe).
World refined zinc consumption increased by 6.3% year-on-year in 2021 to reach just over 14M tonnes. This was 1.0% higher than world consumption in 2019 (before global impact of the COVID-19 pandemic). This expansion included strong growth for the three largest consumer markets for zinc globally.
China’s total consumption grew by 4.4% year-on-year in 2021 (to be 3.0% higher compared with 2019), EU consumption grew 11% (to be 3.0% higher compared with 2019), and the rest of Asia (exc. China, Japan, India and South Korea) grew by 15% (to be 8.4% higher compared with 2019).
Global mine production in 2021 back to pre-pandemic levels. World mine production of zinc grew 5.3% in 2021 to reach 12.9M tonnes. This was also just 0.1% lower than world mine production in 2019.
Of the major producers, China’s total mine production was flat for the 2021 calendar year at 4.1M tonnes. The lack of growth reflects a severely impacted September quarter, with production down 7.5% year-on-year.
World mine output is forecast to grow by 1.4% to reach 13.1M tonnes in 2022. Output is then forecast to rise by 3.3% in 2023 to reach 13.5M tonnes by 2023, as new mine capacity comes online. Mine production is projected to rise by 1.4% annually, to reach 14M tonnes by 2027.
New supply over the outlook is expected to come from regions including Central and South America, Eastern Europe, and Africa.