Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Temporary suspension of mining, accumulated zinc stocks in China and slower than expected demand recover has disrupted zinc markets globally, said Hitesh Jain, Lead Analyst at YES Securities.


In an interview with Davis Index, Jain spoke of what is challenging the zinc market amid the pandemic. LME zinc prices have firmed over the past few weeks, supported by growing mine disruptions. Around 2.5mn mt per year of mine capacity is either temporarily suspended or is running at reduced operating rates due to COVID-19 pandemic, representing roughly 15pc of global mine supply, said Jain.


The combination of supply disruptions resulted in a significant decline in spot treatment charges (TC) during April. On the demand side, economic conditions have improved modestly in China but there is ample metal availability due to stock accumulated during China’s quarantine period. Outside of China, zinc demand has deteriorated noticeably.


The global refined market was in a 188,000mt surplus in the first two months of 2020, higher than 45,000mt surplus in the same period last year, according to ILZSG estimates. Although zinc supply has declined in the wake of the COVID-19 demand implosion, the curtailment has not been sufficient to materially change the growing surplus projections. The Chinese economy hinges on domestic consumption and global trade, economic recovery is bound to be slow there as both these pillars look shaky for the moment.


Renewed trade frictions with the US will only complicate matters further. Jain said due to shutdowns in China during the first few months of the year, we believe real refined demand has contracted by a much larger extent than initial estimates.


On the future trend, demand part of the equation is a mysterious variable that needs to be quantified and that depends solely on the assumptions one makes about the COVID-19 situation. On the price front, we expect zinc to trade at $1,850-$2,100/mt during the next two months, said Jain.

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