The global zinc surplus is likely to shrink in 2021 as demand growth outpaces any increase in production, according to Russian copper and zinc producer UGMK.
UGMK expects world zinc production this year to rise 2.9% to 14 million mt as Chinese plants continue to ramp up output in the face of solid domestic demand. However, it forecasts demand growth to outpace that with a 4.2% increase to 13.52 million mt.
UGMK said China will still need to import more zinc concentrate as domestic extraction of the raw material declines.
Last year saw a 0.9% uptick in world zinc production to 13.6 million mt, driven chiefly by an increase in China.
Last year's figures suggest world zinc supply was in surplus by 620,000 mt, but that is likely to shrink to 470,000 mt in 2021, according to UGMK.
In the rest of the world -- the US and the EU -- another volatile year beckons due to uncertainty surrounding the speed of economic recoveries as more European countries were forced to reinstate lockdown measures amid another surge in COVID-19 infections.
UGMK put zinc prices over 2021-2025 in the region of $2,500-$2,900/mt.
The company said it believes global zinc ore extraction at existing mines will reach a peak in 2024, just exceeding the 14 million mt mark. Extraction is likely to enter a stage of decline thereafter as ore quality deteriorates and certain reserve fields coming to the end of their lives.
Projects aimed at resource base replenishments will not suffice to meet growing demand for zinc ore, according to UGMK. The launch of new projects is likely to be delayed as implementation of earlier stages was suspended during periods of low prices. The base cost of zinc used to assess the economic viability of projects is $2,668/mt, UGMK said.
The company said that over the 2025-2030 period, the market may well be facing a deficit in zinc concentrate production that will push up product prices.
Russia recovery to take three years
UGMK expects a gradual recovery in zinc demand in Russia, reaching the pre-pandemic level of 250,000 mt/year towards the end of the 2021-2023 period.
Russia's zinc production last year grew 2% year on year to 211,800 mt, contributing 1.6% to the world's total.
It also imported 30% less zinc at 34,900 mt, with Kazakhstan supplying 81% of that and Uzbekistan 17%.
The decline in imports last year was largely down to Russian steel company NLMK slashing its procurement from Kazakhstan by half from the previous year.
At the same time, Russia doubled its zinc exports to 14,700 mt, with just over half that volume shipped to the Netherlands and a third to Spain.
Russia's apparent zinc consumption last year fell 7% year on year to 232,000 mt, with imported volumes comprising just 15% of the domestic market volume.
Major Russian steel companies, except for MMK, increased their shipment volumes of zinc-coated coils, but the cumulative volume of zinc-coated coil sales by MMK, NLMK and Severstal was still 1% lower year on year at 2.97 million mt.
