Threat of global zinc shortage drives prices to ten-year high
Global demand for zinc is steadily growing, which poses a threat of a shortage of the metal in the coming years.
Yesterday zinc prices on the London Metal Exchange (LME) reached a ten-year high of US$3,091 per tonnes. Such growth has become a record since 2007, when prices amounted to US$3,070 per tonne.
The growth in prices is a reaction of the market on the ever growing shortage of zinc on the global market, which is estimated at about 200,000 tonnes, being equivalent to about 2% of world consumption of the metal.
Analysts predict the market will remain tight in 2017, despite the projected growth in production of 6.7% and a slowdown in the growth of consumption by 2.6%.
According to experts of Russian Vedomosti business paper, since 2007, there has been no major investment in the production of zinc. The price for the metal remained low for a long time, as the market feared the launch of the Ozernoe and Kholodninskoye zinc fields, both of which are located in the Russian Buryatiya Republic and are developed by the Russian East Siberian Metals Corporation. However the development of both fields has not yet been started (mainly due to environmental and economic reasons), which lead to a shortage of zinc in the global market.
In 2016 global zinc production fell by 5.5%, while consumption grew by 2.9%. This stimulated further growth of global prices for the metal. The decline in production was also due to the closure of some zinc mines around the world in 2015 and suspension of the launch of new capacities.
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According to analysts’ predictions, the price growth will continue until 2019, when at least 13 new zinc enterprises are expected to be commissioned, which ore will be characterized with high metal content and low processing costs.
In 2016, global zinc production amounted to 12.06 million tonnes. About 35-40% of the global production accounts for China.
In Russia zinc is produced by two enterprises: Chelyabinsk Zinc Plant and Electrozinc (Vladikavkaz). Their capacity is 200,000 tonnes and 110,000 tonnes per year, respectively.
In 2018, East Siberian Metals Corporation, together with Chinese investors, plan to launch the production of zinc with the capacity of 350,000 tonnes per year on the basis of the Ozernoye field. In addition to zinc, the project also involves the production of lead in the volume of 40,000 tonnes.
The reserves of the Ozernoye field are estimated at almost 9 million tonnes, zinc content in ore is 5.2% . The cost of production at the field is estimated at US$1,190 per tonne. It is planned that up to 50% of future zinc production from Ozernoye will be supplied to China.
Eugene Gerden is an international free-lance writer, based in St. Petersburg, who specializes on writing in the field of mining, metals and rare earth metals. ... <Read more about Eugene Gerden>