SMM analysis: The shortage of zinc concentrate supply and other factors have driven up the prices of recycled zinc raw materials. What are the future trends?

At the 2024 SMM 13th Annual Metal Industry Conference—2024 SMM Aluminum Industry Annual Conference, hosted by SMM Information & Technology Co., Ltd. (SMM) and Western Mining, with special guidance from the China National Association of Metal Material Trade (CAMT) and the Aluminum Processing Technology Center, SMM Senior Consultant Ding Ruoyu shared insights on the "Future Development Trends of Secondary Zinc Raw Materials." When discussing the future development trends of secondary zinc raw materials, he stated that the secondary industry is expected to receive continuous policy support, raw material sources will become more diversified, industry concentration is low, production will become cleaner, and enterprises will have new opportunities to go abroad.

Drivers of Secondary Zinc and Zinc-Containing Scrap Development

Zinc resource shortages and supply chain security are the core drivers for the utilisation of secondary zinc raw materials. As of 2023, global zinc reserves (economically recoverable reserves) are 220 million mt (metal content), mainly distributed in Australia, China, Russia, Peru, and other countries. Based on the 2023 production of 12 million mt (metal content), the global static recoverable life of zinc resources is 18.3 years, which is relatively low among base metals. In comparison, the recoverable life of aluminum and copper is 80 years and 40 years, respectively. China's lead-zinc mines are widely distributed, with abundant resource reserves, characterized by more low-grade ores and fewer high-grade ores, more associated components and fewer single components, and complex mineral compositions. Over the past 20 years, China's zinc ore mining volume has increased rapidly, and during the mining process, there have been phenomena such as mining rich ores and abandoning poor ores, and excessive mining. More than 50% of the rich ore resources have been utilized, and the problem of resource depletion is prominent. With the increasing risk of overseas resource supply chains, the challenge of zinc resource supply in China has been exacerbated.

Policy Support for Secondary Zinc Development

Under the "dual carbon" background, the non-ferrous industry, as one of the "eight major industries" with high energy consumption, is facing extremely challenging energy-saving and carbon-reduction tasks. In addition to upgrading smelting processes and using renewable energy, the recycling of secondary resources is one of the efficient paths to break through the development dilemma of high energy consumption and low output. It is estimated that using secondary metal resources can save 85%-95% of energy and reduce production costs by 50%-70%. Specifically, according to the China Circular Economy Association, compared with using natural ore resources, producing 1 mt of secondary copper can reduce carbon dioxide emissions by about 2.8 mt, producing 1 mt of secondary aluminum can reduce carbon dioxide emissions by about 14.6 mt, producing 1 mt of secondary lead can reduce carbon dioxide emissions by about 1.75 mt, and producing 1 mt of secondary zinc can reduce carbon dioxide emissions by about 2.43 mt.

In recent years, China has continuously introduced favorable policies for the secondary metal industry at the national level, and local governments have also matched supporting policies based on local conditions. The metal recycling and secondary industries have ushered in greater development opportunities, including the zinc-containing scrap and secondary zinc industries.

Sustainable supply chains and corporate social responsibility are also important drivers for the utilization of zinc-containing secondary resources.

In addition to policy factors, the pursuit of corporate social responsibility by supply chains and enterprises themselves is also a driving force for enterprises to undergo sustainable transformation. State-owned enterprises, foreign enterprises, and overseas downstream customers' requirements for product carbon footprints and the use of recycled materials are transmitted along the supply chain to upstream enterprises, promoting the further use of zinc-containing scrap.

Current Status of Secondary Zinc Raw Material Development

Steel dust remains the most important raw material source for secondary zinc.

Introduction to Common Secondary Zinc Raw Materials Steel mill dust:

• Steel mill dust refers to the dust collected by dust removal equipment such as electrostatic precipitators, gravity dust collectors, and bag filters during various processes from sintering to rolling in steel mills.

• According to the source, steel dust can be divided into types such as sintering machine head dust, blast furnace bag dust, and converter dust. The material composition of different types of steel dust often varies and needs to be treated differently.

• The composition of steel dust is relatively complex. In addition to iron, it generally contains alkali metals and alkaline earth metals, chlorine, silicon, zinc, carbon, and other components. Alkali metals and alkaline earth metals make steel dust highly corrosive, and the presence of zinc can gradually increase the zinc load in the furnace, causing harm to production.

• Steel dust as a raw material for producing low-grade zinc oxide: Under high-temperature reduction conditions, zinc oxides are reduced and vaporized into zinc vapor, which is discharged with the flue gas, separating zinc from the solid phase. In the gas phase, zinc vapor is easily oxidized to form zinc oxide particles, which are collected in the flue gas treatment system along with the dust.

Steel smelting dust: • During the smelting, blowing, and refining processes of pyrometallurgical copper smelting, the smoke and dust formed by the volatilization, oxidation, or airflow action of low-boiling-point elements such as Pb, Zn, and As in copper concentrates, as well as the smoke and dust from waste heat boilers, are collected by the dust collection system.

• The main components of copper smelting dust are copper oxide, zinc oxide, and lead oxide. Depending on the chemical composition, which varies with the ore source and copper smelting process, it contains metals such as copper, zinc, lead, arsenic, antimony, cadmium, tin, and indium, with high recovery value. During the escape process of smoke and dust, they come into contact with gases such as oxygen and sulfur dioxide in the flue gas and are oxidized into sulfates. Therefore, valuable metals in the dust mainly exist in the form of metal oxides and metal sulfates, which is conducive to metal recovery.

• The comprehensive utilization process of copper smelting dust can be divided into four major categories: pyrometallurgical, semi-hydrometallurgical, full hydrometallurgical, and combined beneficiation and smelting. Among them, the hydrometallurgical process has developed rapidly in recent years. This process uses acids, alkalis, salts, etc., to leach metals such as Cu, Zn, As, and In, and then uses different methods to separately treat the leachate and leaching residue. In addition to traditional raw materials such as steel dust, with the improvement of industry technology levels in recent years, more and more zinc-containing scrap has begun to be used, such as lead-zinc smelting dust, steelmaking sludge, lead-copper smelting slag, zinc concentrate tailings, and smelting water treatment sludge. Due to the variety of metals contained in these scraps, the focus has shifted from extracting a single metal to comprehensive utilization of the scrap, allowing the recovery of metals such as iron, lead, copper, and zinc.

Secondary Zinc Raw Material Industry Chain

Traditional raw material steel dust is experiencing supply tightness. In recent years, due to the "capacity reduction" in the steel industry and weak demand from downstream industries such as real estate, China's steel production has remained stable without significant increases. As the real estate industry is unlikely to see a "V-shaped" rebound, the supply of steel and steel dust is expected to remain stable in the future. However, the capacity of the low-grade zinc oxide industry is expanding, leading to tight supply of traditional steel dust raw materials. In this context, the promotion of non-traditional metal-containing scrap and comprehensive metal recovery will be further advanced. Multiple factors have driven the increase in secondary zinc raw material capacity in recent years. Factors such as insufficient supply of zinc concentrate and tight supply of steel dust have jointly pushed up the prices of secondary zinc raw materials recently. The rise in refined zinc prices and insufficient supply of steel dust have jointly led to high prices of secondary zinc raw materials, putting significant pressure on enterprises in the secondary zinc industry chain. In the future, attention needs to be paid to whether the supply of zinc concentrate from domestic and foreign sources will increase as expected. If the tight supply situation at the mine end is alleviated, the prices of secondary zinc raw materials are expected to fall against the backdrop of overall weakening domestic zinc consumption. National policies favor the import of qualified low-grade zinc oxide products. Due to the insufficient supply of domestic steel dust and other zinc-containing raw materials, coupled with fierce competition in the domestic low-grade zinc oxide industry, some Chinese enterprises have chosen to invest abroad. Since steel dust and other zinc-containing raw materials are classified as solid waste and cannot be exported to China, these overseas enterprises can only build low-grade zinc oxide plants abroad. They produce low-grade zinc oxide from purchased steel dust and other raw materials overseas and then sell it locally or export it to China.

Currently, Chinese overseas enterprises are mainly concentrated in Southeast Asia, Russia, and Kazakhstan. Enterprises established in Southeast Asia mainly use steel dust produced by local steel mills as raw materials, while enterprises in Russia and Kazakhstan also use lead-zinc ore, zinc oxide ore, etc., in addition to steel dust. Steel dust raw materials in some parts of Europe (such as the Balkan Peninsula) are relatively cheap, but due to extremely stringent environmental protection requirements, investing in Europe carries significant risks.

Imported low-grade zinc oxide must strictly meet relevant standards (1/2).

According to the "Announcement on Matters Concerning the Comprehensive Prohibition of the Import of Solid Waste" (Announcement 2020 No. 53), from January 1, 2021, China will prohibit the import of solid waste in any way and prohibit the dumping, stacking, and disposal of solid waste from outside China. Since low-grade zinc oxide is a mixture rich in zinc oxide produced from steel dust and other waste materials, the zinc oxide content may vary depending on the raw materials. Therefore, it may be identified as solid waste and returned by customs during import. Several such cases have occurred since 2021. The imported low-grade zinc oxide is named "zinc oxide concentrate" (tariff code: 3824999980, a mixture with a zinc oxide content of 50% or more by weight), and the product must meet the requirements of "Zinc Oxide Concentrate for Smelting" (YS/T 1343-2019) to avoid being identified as zinc-containing waste.

Imported low-grade zinc oxide must strictly meet relevant standards (2/2).

Low-grade zinc oxide imported from overseas to China must meet the requirements of "Zinc Oxide Concentrate for Smelting" (YS/T 1343-2019): • Process source: Zinc oxide concentrate for zinc smelting produced by the volatilization and enrichment of zinc-containing materials through pyrometallurgical processing; • Moisture: The moisture content (mass fraction) in zinc oxide should not exceed 10%; • Appearance quality: Zinc oxide should be in powder form, with uniform color, and should not contain foreign inclusions; • Chemical composition must meet the requirements in the table above. If the imported goods do not meet the above standards, they will be identified as solid waste and returned according to the "General Rules for the Identification of Solid Waste" (GB 34330-2017) and the "Procedures for the Identification of Solid Waste Attributes of Imported Goods." At the same time, fines will be imposed for violating the "Law of the People's Republic of China on the Prevention and Control of Environmental Pollution by Solid Waste."

Future Development Trends of Secondary Zinc Raw Materials

1. The secondary industry is expected to receive continuous policy support. The secondary resources industry is conducive to building a circular economy, ensuring the security of the base metal supply chain, and aligning with the "dual carbon" goals. It will continue to receive support from central to local policies in the future.

2. Raw material sources will become more diversified. With the real estate industry's "V-shaped" rebound unlikely, the supply of traditional raw material steel dust will remain tight. As process levels improve, the utilization rate of non-traditional zinc-containing scrap such as steelmaking sludge and water treatment sludge will further increase.

3. Industry concentration is low. The industry has low entry barriers. Currently, low-grade zinc oxide and zinc calcine enterprises are relatively scattered, with low industry concentration. Additionally, with policy promotion, steel mills have begun to engage in low-grade zinc oxide production, further complicating the competitive landscape.

4. Enterprises will have new opportunities to go abroad. Due to tight domestic raw material supply, intensified competition, and national policy support for the import of low-grade zinc oxide, Chinese low-grade zinc oxide enterprises will have favorable opportunities to go abroad in the future.

5. Production will become cleaner. Both pyrometallurgical and hydrometallurgical processes for utilizing zinc-containing scrap carry environmental pollution risks (waste or wastewater). Against the backdrop of "environmental protection is no small matter," the environmental compliance of low-grade zinc oxide production will also improve.