Zinc prices hit a 10-year high this past week, climbing to $3,000 per metric ton ($1.36 per pound) on the London Metal Exchange on Wednesday. Strong global demand and shrinking inventory boosted prices, as well as a shortage of Chinese zinc.
The primary use of zinc is for the production of coated steels such as galvanized and Galvalume. A surge in zinc prices could have an impact on the coating extras used by steel mills across the world. Higher zinc prices means higher costs to apply zinc to steel.
Environmental inspections have shut down 60 percent of zinc mines in China for one month, further reducing constrained supply caused by capacity reductions at Swiss-based miner Glencore. Glencore idled one-third of its zinc capacity in October 2015. Nearly 500,000 metric tons of zinc were removed from the market, pushing prices up by more than 90 percent.
Infrastructure building in China has led to a surge in steel production that has elevated prices for steel, as well as zinc used for galvanized steel. China accounts for 40 percent of global zinc consumption, and with some of its zinc production restricted or idled due to environmental concerns, further price increases are expected.
Standard Chartered is forecasting a global deficit of 135,000 metric tons of zinc concentrate for 2017, and a 222,000 metric ton deficit of refined zinc, according to the Financial Times.
The China Metal Information Network, Anataike, says cuts to Chinese zinc smelting due to tight concentrate supply will extend China’s zinc shortage into 2018 and possibly 2019.
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