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

The zinc market was hit hard by the COVID-19 pandemic, with the significant drop in prices between March and July rounding off a challenging start to the year for this base metal. Eduardo Alverde Villareal, chief executive officer, Zinc Nacional spoke with Davis Index on how the ongoing scarcity of material is impacting industries that rely heavily on zinc products, the company’s plans for its zinc oxide plant in the US, and his outlook for the market in the future.


Zinc prices have recovered from their lows of mid-March since businesses resumed after the COVID-19 related shutdowns. Do you expect the rally to continue?

The scarcity of mined zinc ores has been responsible for the significant recovery in zinc prices. This year, zinc mines around the world were hit in three ways. Firstly, the treatment charge (TC) by zinc smelters were the highest in decades this year. The second factor was the fall in zinc prices—an ongoing challenge since 2018—which was exacerbated by the COVID-19 pandemic that resulted in a terrible price decline from March to July. Finally, port restrictions and shipping challenges that began in December 2019 continued throughout the year due to the pandemic and affected supply. We expect prices to remain at current levels until the end of this year. 


What factors have impacted the zinc scrap and zinc oxide segments this year? How can the market overcome its current challenges?

There are several challenges impacting zinc byproducts and zinc oxide. The biggest one is related to the global decline in automobile manufacturing. The slowdown in this industry temporarily reduced the consumption of galvanized steel, tires (that typically consist of 5pc zinc oxide), and auto parts made from zinc and zinc alloys. 


The reduction in galvanized sheet and zinc-containing auto parts has affected the galvanizing industry and the zinc alloys business thereby reducing the generation of dross and skims. The slowdown in the tire and rubber industry and the ceramic industry worldwide is a contributing factor with respect to the market impact. The market will overcome these challenges as global economies recover. 


You plan to begin the WSP plant in Cass County in the first quarter of 2021. Can you give us some details about the plant? How is construction work progressing?

The Waelz Sustainable Products (WSP) zinc oxide plant in Cass County, Indiana is a joint venture between Zinc Nacional and Heritage Environmental Service. Through this plant, we intend to make zinc oxide from EAF metallurgical dust that is produced as a by-product in the steelmaking process. The plant’s location will enable us to purchase steel dust from the area’s steel mills, thereby benefiting them in disposing of this material in a secure, environmentally friendly manner. 


Construction of the plant started at the beginning of the year and around 32pc is completed, right on schedule. We have made significant progress with concrete; we have poured the main buildings and foundations. All the main equipment has been purchased and fabrication is in progress. We plan to begin the electrical and mechanical equipment installation starting in 2021.


The local approvals process for the WSP plant was facing some delays. Is it completed now?

The County Council voted to approve the bonds during their September meeting, successfully completing the local approval process. The start-up remains on schedule for late Q1 2021.


What is your outlook for the zinc and zinc oxide market in the short- to medium-term?

We are witnessing a rapid recovery in the tire, rubber, and ceramic industries, which would greatly help in the revival of the zinc market. By Q4 2020, we expect the market for zinc to recover to around 85pc of the same period last year and expect complete recovery by Q1 2021.

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