Zinc
From IntFX
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[edit] Overview
Zinc is a moderately-reactive bluish-white metal that tarnishes in moist air and burns in air with a bright greenish flame, giving off plumes of zinc oxide.
[edit] Applications
Zinc is commonly mined as a co-product with standard lead and both metals have growing core markets for their consumption. For zinc, the main market is galvanising, which accounts for almost half its modern-day demand. Zinc’s electropositive nature enables metals to be readily galvanised, which gives added protection against corrosion to building structures, vehicles, machinery and household equipment.
Zinc is the fourth most common metal in use, trailing only iron, aluminium, and copper in annual production.
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- Zinc is used to galvanize steel to prevent corrosion.
- Zinc is used to Parkerize steel to prevent rust and corrosion
- Zinc is used in alloys such as brass, nickelled silver, typewriter metal, various soldering formulas and German silver.
- Zinc is the primary metal used in making American cents since 1982.
- Zinc is used in die casting notably in the automobile industry.
- Zinc is used as part of the containers of batteries. The most widespread such use is as the anode in alkaline batteries.
- Zinc is used as the anode or fuel of the zinc-air battery/fuel cell providing the basis of the theorised zinc economy.
- Zinc oxide is used as a white pigment in watercolours or paints, and as an activator in the rubber industry. As an over-the-counter ointment, it is applied as a thin coating on the exposed skin of the face or nose to prevent dehydration of the area of skin. It can protect against sunburn in the summer and windburn in the winter. Applied thinly to a baby's diaper area (perineum) with each diaper change, it can protect against rash. As determined in the Age-Related Eye Disease Study, it is part of an effective treatment for age-related macular degeneration in some cases.
- Zinc chloride is used as a deodorant and can also be used as a wood preservative.
- Zinc sulfide is used in luminescent pigments such as on the hands of clocks and other items that glow in the dark.
- Zinc metal is included in most single tablet over-the-counter daily vitamin and mineral supplements. It is believed to possess anti-oxidant properties, which protect against premature aging of the skin and muscles of the body. In larger amounts, taken as zinc alone in other proprietaries, it is believed by some to speed up the healing process after an injury. Preparations include zinc acetate and zinc gluconate.
- Zinc gluconate glycine and zinc acetate are also used in throat lozenges or tablets in an attempt to remedy the common cold.
[edit] Prices
World zinc prices continued to climb through Q4 2006. In early November, spot zinc prices were around US$4500 a tonne (US204c/lb), the highest ever in nominal terms and almost three and a half times the 2005 average price of US$1380 a tonne (US63c/lb). For 2006 as a whole, zinc prices are estimated to have averaged nearly US$3300 a tonne (US149c/lb), 140% higher than in 2005.
The rise in prices during 2006 reflects continued strong demand growth, particularly from China, coupled with relatively low supplies of zinc concentrates. This has led to a sharp decline in zinc stockpiles, which hit a low of around 90,000kT at the end of 2006- equal to three days worldwide consumption. The end of 2006 has seen stockpiles rise a fraction as Singapore stockpiles increased - believe to be a result of Chinese dumping due to a tax rebate that ended on December 15.
In 2007, zinc prices are forecast to rise by almost 30 per cent to average around US$4200 a tonne (US192c/lb). Low investment in exploration and mine development in the late 1990s and early 2000s (a time when prices were low) has limited the ability of mining companies to expand supply quickly in the current climate of strong demand and high prices. Consequently, zinc consumption is forecast to exceed production again in 2007, leading to a further drawdown in stocks. Specifically, zinc stocks are forecast to decline by 30 per cent to a critically low ten days of consumption by the end of 2007.
[edit] Supply/Demand: Worldwide consumption rising
World zinc consumption is estimated to have risen by 3 per cent to almost 11 million tonnes in 2006 and is forecast to rise by nearly 2 per cent in 2007 to 11.2 million tonnes. While demand is expected to remain robust, particularly in China and India, this is expected to be partially offset by weaker demand in western countries. Around 50 per cent of zinc consumed is in the production of galvanised steel, making zinc consumption highly dependent on developments in the galvanised steel industry.
[edit] Demand Driver: Galvanised steel production in Asia
Demand in Asia, which accounts for 53 per cent of the global zinc market, continued to grow during 2006, with consumption increasing by 5 per cent year on year to September. China and India accounted for the majority of this growth, with zinc consumption increasing by 7 per cent and 8 per cent respectively. This growth is being driven by the rapidly expanding galvanised steel industries in China and India which, in turn, reflects strong growth in construction, motor vehicle and household appliance manufacturing.
Industries, such as motor vehicle manufacturing, which use large amounts of galvanised steel, are increasingly being relocated away from north America and Europe to Asia. This shift is occurring as manufacturers seek to take advantage of lower production costs and has led to a significant increase in the production and consumption of galvanised steel in Asia.
As a result of such developments, China surpassed the United States in 2000 to become the world’s largest zinc consumer. As incomes continue to rise in developing Asian economies, sales of motor vehicles and household appliances are expected to rise strongly, providing further support for the consumption of galvanised steel and hence zinc in the region.
[edit] Demand Driver: Consumption growth slowing in the United States
On the downside, US economic growth is assumed to slow in 2007, with the housing sector to be significantly affected. Specifically, US housing permits dropped by 11 per cent year on year during the first nine months of 2006. As galvanised steel is used extensively for roofing in the United States, a decline in housing construction is expected to flow through to lower consumption of galvanised steel and zinc. A broad based economic slowdown in the United States may also affect consumer spending on zinc intensive products such as motor vehicles and household appliances.
[edit] Supply Driver: World production rising however affected by disruptions
Global refined zinc production is estimated to have risen by 3 per cent to 10.5 million tonnes in 2006 and is forecast to rise by nearly 5 per cent in 2007 to 11 million tonnes. Growth in world zinc metal production during 2006 was restricted by the low availability of zinc concentrates. This largely reflected the low prices that prevailed in the late 1990s and 2000s, which resulted in the closure of some marginal mining operations, and discouraged new exploration and the development of new mines.
A number of disruptions to mine production also contributed to relatively low availability of zinc concentrates. Specifically, there was an eleven day strike at Kumba Resources’ Rosh Pinah zinc mine (70 000 tonnes a year) in Namibia during November. It is estimated that up to 5000 tonnes of zinc production was lost because of this strike (although some of this may have been made up during the remainder of 2006). Mining unions in Peru have also raised the prospect of a strike to oppose government plans to limit profit sharing. Peru is the world’s third largest producer of mined zinc, accounting for 12 per cent of global mine production. An extended strike in Peru would therefore cause a significant disruption to zinc production and lead to a further rise in zinc prices.
[edit] Supply Driver: New mines/restarts adding to production in 2007
In 2007, ABARE expects worldwide suppplies to increase due to a number of new mines and several marginal mines being restarted:
| When | Mine | Location | Owner | '07 kT | Annual Tonnes |
| Shaimerden | Kazakhstan | Kazzinc | 60,000 | ||
| mid-2007 | San Cristobal | Bolivia | Apex Silver Mines | 182,500 | |
| 2006 | Balmat | New York | Hudbay Minerals | 60,000 | 60,000 |
| early-2007 | Lennard Shelf | New York | Teck Cominco | 70,000 | |
| ? | 3 Mine Restart | Tennessee | Glencore | 60,000 |
Higher mine production should assist in easing the low supply of zinc concentrates and enable refineries to operate closer to capacity. However, this increase in production in 2007 is not expected to be sufficient to bring the market back into balance as strong demand in Asia is forecast to result in consumption exceeding production by around 110 000 tonnes in 2007.
The following forecast is from Abare Economics, the Australian Government Research organisation. LME stocks at the end of 2006 closed out at around 90,000kT (around 3 days world wide consumption).
| Worldwide Forecast | ||||||||||
2005 |
2006 |
f |
2007 |
f |
% |
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| World | change |
|||||||||
| Production | kt |
10 229 |
10 540 |
11 036 |
4.7 |
|||||
| Consumption | kt |
10 628 |
10 960 |
11 150 |
1.7 |
|||||
| Closing stocks | kt |
808 |
418 |
304 |
– 27.3 |
|||||
| – weeks consumption | 4.0 |
2.0 |
1.4 |
– 30.0 |
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| Price | US$/t |
1 382 |
3 285 |
4 238 |
29.0 |
|||||
USc/lb |
62.7 |
149.0 |
192.2 |
29.0 |
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| http://www.abareconomics.com/interactive/ac_dec06/excel/zinc.xls | ||||||||||
| Source: Abare Economics www.abareeconomics.com | ||||||||||
[edit] Supply from 2010
Zinc prices, on a downward slope since hitting a record peak in November 2006, are expected to fall further this year as mine output growth accelerates and boosts production of the metal used to galvanise steel.But lower prices, tight credit and high borrowing costs will eventually limit the number of new mines and hence supplies, which should boost prices towards the end of the decade and beyond. "It still looks as though the market is going to be in surplus this year and next, but things will get more positive in 2011 to 2012, with very little growth in new mine supply," Some key mines are also due to close or have lower output around then, further tightening supplies. Global zinc prices could easily scale new peaks during this period if demand grew at a decent pace.Benchmark zinc on the London Metal Exchange hit an all-time high of $4,580 a tonne in November 2006 and has since fallen to around $2,240, partly because speculators betting on higher prices have cut their holdings."Prices will continue to fall through to 2009 at least,"Predicting a drop to $1,600 by the end of 2008. "It's hard to paint a scenario where the price falls and bounces immediately."But some analysts think the downside has been overdone and predict the average price this year will be above levels now. They argue that most of the over-supply will show up as stocks of mined material or concentrates rather than as metal, leaving the market vulnerable to closures and disruptions.Surplus mine stocks will be processed eventually though and should keep smelters amply supplied until 2010.The International Lead and Zinc Study Group recently forecast a 215,000-tonne surplus of the metal this year, with output rising by 6.4 percent to 12.06 million tonnes.
Big Cutbacks Unlikely
Significant mine cutbacks or closures were unlikely in the next couple of years because the cost of shutting mines down was a strong deterrent."The typical miner is not going to hurt until the price is at $1,500, but they'll keep going and assume someone else will cut back first."Earlier this decade, prices languished just above $1,000 a tonne and many miners continued to churn out material.But this time, rising costs of labour, power and equipment mean some producers are already feeling the pinch.Last month,major producer Teck Cominco said it might close its Lennard Shelf mine in Western Australia in the final quarter of next year if prices stagnated.The mine was only re-opened last year after spending more than three years in "care and maintenance". It was originally scheduled to stay in operation until 2011.Meanwhile, the credit crunch has made banks more cautious, particularly for smaller zinc mine projects, which may first have been considered when prices were much higher. "Some mines that aren't financed are going to find it difficult to get funding, but not all of them.China will be the key to prices over the next couple of years. Chinese zinc mine output grew by more than 9 percent last year to 3.11 million tonnes, accounting for more than one-quarter of the global total.But mine cutbacks there would still have to be substantial to curtail metal production, with high concentrate stocks still available for conversion into metal in 2009 and 2010.So far there has been no sign of this. China's National Bureau of Statistics said recently the country's first quarter zinc mine output rose almost 17 percent from a year earlier."The supply-side response will have to come in China.[1]
[edit] Australian Outlook: Higher mine and metal output
Australian zinc mine output rose by 2 per cent to 1.38 million tonnes in 2005-06. This increase was drawn mainly from the ramping up of production at Oxiana’s Golden Grove mine in Western Australia.
Zinc mine output is forecast to rise by 6 per cent in 2006-07 as new mines, expansions and restarts are commissioned. In particular, production from Xstrata’s Mount Isa mines is expected to increase with the completion of stage 1 of the zinc–lead concentrator expansion, with increased feed coming from the ramping up of the Black Star openpit mine. Zinc mine production is also expected to be boosted by the commencement of production from Intec’s Hellyer concentrate project (30 000 tonnes a year) in Tasmania and Teck Cominco is on schedule to restart the Lennard Shelf mine (70 000 tonnes a year) in early 2007.
Australian production of refined zinc fell by 4 per cent in 2005-06 because of once in thirty year maintenance at Zinifex’s Hobart refinery. Refined zinc output is forecast to rise by 9 per cent in 2006-07 as production at the Hobart refinery returns to normal and higher production from Sun Metals’ zinc refinery is also expected.
Despite a decline in export volumes in 2005-06, export values rose by 73 per cent to $2.5 billion because of substantially higher prices. The volume of zinc concentrate and refined exports are forecast to rise by 8 per cent and 6 per cent respectively in 2006-07 as production increases. The value of zinc exports is forecast to increase by 62 per cent to $4.1 billion as a result of higher production and higher prices.
[edit] Zinc Companies
Worlwide top producers:
- Teck Cominco
- Korea Zinc
- Zinifex ZFX
Mid-tier and small caps:
[edit] Total Chinese Production
- China produced 1.73 million tonnes of refined zinc in the first seven months of 2006, up 13.7 percent from 2005.
- Annually this would equate to 3,000,000t for 2006.
- Antaike forecast production growth of only 3.6% for 2007.
[edit] Main production sources
[edit] Hunnan Province
Jan. 16, 2007 - Hunan Zhuye Torch Metals Co., China's biggest leading zinc producer based in central China's Hunan province will add 100,000 tonnes of annual capacity when it completes upgrading a production line in June 2008. It is estimated that Zhuye produces about 400,000t of zinc p/a. At the end of 2008, they will be on target to produce approximately 450,000t. The upgraded production line can also produce scrap zinc containing 30,000 tonnes a year from mid 2008. Zhuye's zinc output in the first half of 2006 rose 22 percent over the same period in the previous year to 196,000 tonnes.
[edit] Liaoning province
Huludao Zinc Industry Co.'s zinc output rose 2 percent to 90,737 tonnes in the first half of 2006. Total capacity is around 370,000 tonnes a year.
[edit] Yunnan province
Hongda Group is a majority owner of China's largest proven zinc reserves. It hastwo plants, with one plant in the Yunnan province, which started production in 2005. It has a designed capacity of 100,000 tonnes p/a of refined zinc a year. The plant in Lanping is capable of producing 120,000 tonnes of refined zinc. The company also operates an 80,000 tonne p/a plant in the neighbouring Sichuan province, which is running at full production. The two production bases will increased Hongda's zinc production to 200,000 tonnes in 2006 and will likely do the same for 2007.
[edit] Consumption
In August 2006, Antaike forecast that:
- Apparent consumption in China has grown 20 percent every year
- Consumption was approx 3 millions tonnes in 2005
- China may need almost 4.8 million tonnes and production is capped at 5 million by 2010
On January 15, 2007 Antaike forecast that:
- Consumption in China may rise 7.3 percent in 2007., according to
[edit] Supply
In August 2006, Anitaike forecast that:
- Supply is likely to lag 10% behind demand or consumption..
- The 3rd largest zinc miner, Hongda Group increased production in 2006 to 200,000t from 80,000t.
- Annually China was on target in 2006 to produce approximately 3,000,000t .
On January 15, 2007 Antaike forecast that:
- Production would grow by only 3.6 percent.
[edit] Analysis
- If China's apparent consumption grows 10% every year they will still need 4,831,530 tonnes by 2010. (10% compounded per year x 3,000,000 over 5 years)
- A conservative estimate of the consumption/demand increase for 2006 is 330,000t.
- For 2007 it is 243,090t or 7.3%.
[edit] Interpretation
- Consumption has grown over 2006, 2007 by 573,090t
- A production shortfall of 300,000 for 2006 was likely if consumption grew by 10% in 2006 from 3,000,000t in 2005 to 3,300,000t.
- If production grows by only 3.6% during 2007 and consumption increases by 7.3%, 2007 will continue to see a shortfall.
[edit] Conclusions
- Production increase for 2007 - 3,000,000t x 3.6% = 108,000t, totalling 3,108,000t
- Consumption increase for 2007 - 3,300,000t x 7.3% = 243,090t totalling 3,543,090t
- Shortfall for 2007 = 3,543,000t – 3,108,000t, totalling 435,000t
- New production required for 2007 = 543,000t (shortfall plus production increase)
