SHANGHAI, Nov 25 (SMM) – Zinc prices are expected to remain under pressure from oversupply in the year ahead, but low stocks globally and economic stimulus measures will lend some support, according to SMM senior lead and zinc analyst Darius Li at the recent China Nonferrous Metal Industry Annual Meeting 2019 and the 2020 (SMM) Metal Price Forecast Conference in Shanghai.
Li estimates that China’s production of refined zinc will grow 370,000 mt to 5.7 million mt in 2019. Production rose a record high of 529,300 mt in October, bringing the tally for the first 10 months of the year to 4.77 million mt, with a year-over-year increase of 7.75%, according to SMM data."With healthy profits encouraging Chinese zinc smelters to remain in high gear, China’s zinc supply surplus will further widen next year," he said.
China’s imports of refined zinc increased 10.76% year on year to 473,000 mt in January-September, bolstered by Beijing’s tax cuts and persisting capacity bottlenecks early in the year, but the profits on imports have slipped into deep negative territory.
Zinc concentrate supply increase boosted treatment charges and recovered smelter margins, leading to strong refined production.
TCs for domestic zinc concentrate assessed by SMM now stand at 6,100-6,500 yuan/mt in Pb content, more than doubled from 3,000 yuan/mt a year ago. For seaborne materials, TCs soared about 250% to $270-290/dmt during the same period.
Despite rising output at mines overseas, Li expects limited upside in TCs in the fourth quarter of 2019, in anticipation of robust demand from Chinese smelters and as miner margins have been squeezed by lower zinc prices.
While zinc production keeping refreshing record highs, visible inventories of refined zinc in China failed to increase substantially, as smelters stepped up production of zinc alloys.
In the first nine months of the year, China imported 2.26 million mt of zinc concentrate, up 2% from the same period last year. Li expects China’s zinc concentrate imports to exceed 3 million mt for the full 2019.
In addition, Zinc mine supply overseas is expected to grow 300,000-400,000 mt in Zn content, with capacity expanding 640,000 mt in Zn content.Li also gave his forecast on the three-month LME zinc, expecting it to move between $1,900-2,800/mt in 2020, with SHFE zinc at 17,000-21,000 yuan/mt.