Prices
Zinc Prices at Lowest Levels Seen in 5 Years
Written by John Packard
August 25, 2015
In early May 2015 zinc spot price on the LME was trading at, or close to, $1.10 per pound. In early April 2015 US Steel adjusted their coating extras while the rest of the mills remained at the levels they set in early 4th Quarter 2014 when zinc was trading in the range of $1.00-$1.10 per pound.
Since early May the metal has been on a straight trajectory down and the metal closed trading yesterday at $0.7724 per pound. Looking at the www.Kitco.com website we saw that the recent breakdown under $0.80 per pound is the first time since October 2011.
From the zinc producers perspective, zinc pricing was around $1.11 per pound in October 2014 when the majority of the mills moved their extras up. In April the producer price was down to $1.02 per pound and USS moved lower while the rest of the mills did not. Today it is about $0.85 per pound.
The reasoning behind the drop in zinc and other metals (such as copper) is being attributed to the slowdown in the Chinese economy and economies elsewhere around the world. The rise of the U.S. dollar is another key ingredient behind the demise of zinc prices.
Most of the zinc used around the world is used to make galvanized and zinc-aluminum (Galvalume) steels. In order to provide some frame of reference to those of you who purchase galvanized steel, SMU has a tool we use to comparing zinc coating costs to the actual coating extras. The coating cost application has a 3 percent overcoat taken into consideration (this can vary from mill to mill). The tool came from one of our domestic mill sources.
When zinc is selling for $2200 per metric ton (or about $1.00 per pound not counting premiums that are paid to get the zinc delivered) the cost to coat .019 X 60” G90 is $7.46/cwt. When zinc drops to $1700 per metric ton ($0.77 per pound) the cost to coat that same .019 item is $5.76/cwt.
Current coating extras out of the domestic steel mills for .019 G90 range from a low of $6.50/cwt at California Steel to a high of $12.20/cwt at AK Steel. Most mills are using a coating extra of $10.90/cwt prior to any negotiation.
SMU is inquiring with the domestic steel mills to see if any of them are working toward changing their galvanized coating extras. We will keep our readers abreast of any changes.
John Packard
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