Dec '11/Jan '12

Zinc

A balancing act

By C. Baldwin

The zinc industry’s story for the last decade has been one of oversupply, but that is changing. Global surplus has begun to fall – from 317,000 tonnes in 2011 to an expected 135,000 tonnes in 2012, with a possible balanced market by 2014. This trend may also put zinc prices on the rise, if modestly. While some forecasts see the metal’s price plateauing, others expect it to reach US$1,966.75 per tonne in 2012, after ending 2011 around $1,924 per tonne.

Global demand for refined zinc is up, growing 2.2 per cent to 12.85 million tonnes in 2011 and heading to a growth of 3.9 per cent to 13.35 million tonnes in 2012. At the same time, global mine production increased 4.3 per cent to 12.77 million tonnes in 2011 and a further increase of 4.8 per cent to 13.37 million tonnes is expected in 2012. Global refined zinc output increased 2.7 per cent to 13.16 million tonnes in 2011 and should increase by an additional 2.4 per cent to 13.48 million tonnes in 2012.

This upswing is largely due to the growing supply from China. But elsewhere, zinc output is diminishing. What is driving the decrease in oversupply is a number of large zinc mines that are being mined out. Both Minmetals’ Century Mine in Australia (the world’s second largest zinc mine at 500,000 t/y) and Vedanta Resources Plc’s Skorpion Mine in Namibia (145,000 t/y) are set for closure in 2015.

Scaling down

Although the ease in oversupply may be welcomed by producers, there is concern about the lack of large mines set to replace these closures. The historic imbalance has kept interest in developing new projects low, so currently there are few large-scale projects in development. There has been little exploration either, with Hindustan Zinc in India being something of an exception.

Several operators are developing nearby projects: Teck Resources expects to produce 525,000 to 545,000 tonnes of zinc this year by replacing the ore supply from the original deposit at its Red Dog operation with the adjacent Aqqaluk deposit, which will extend operations until 2031; and Century is being replaced by the 200,000 t/y Dugald River Mine, which will come online in 2014.

In Canada, Xstrata will be closing its Brunswick and Perseverance mines, which together produce 300,000 t/y. The Perseverance Mine will be replaced by the 80,000 t/y Bracemac-McLeod Mine, which has a current mine life of four years. Nyrstar will also be restarting its Langlois Mine in northern Quebec in 2012 after putting it on hold for care and maintenance following the economic downturn in 2008.

One of the few greenfield operations in development is Xstrata’s Lady Loretta Mine in Queensland, Australia. Slated to begin operations at the end of 2013, the mine is expected to produce 126,000 tonnes of zinc concentrate annually over a mine life of 10 years.

By far the largest market factor is China, which is both the world’s largest zinc producer and consumer. The country produces about 30 per cent of the global supply, and Chinese demand is expected to grow 5.7 per cent in 2012. Chinese smelters are also pushing up global output of refined zinc, as China seeks to maintain its self-sufficiency in zinc production. Elsewhere, smelters are coming off a period of voluntary production cutbacks in the face of zinc stock accumulation, although production costs are also on the rise.

New markets

Half of the world’s zinc is used in galvanization, the corrosion-resistant zinc plating of steel. Another 17 per cent is used in the production of brass and bronze, and 17 per cent in die casting. The construction and manufacturing industries consume a great deal of zinc, and rising automobile production is a boon to the industry.

New uses for zinc are being found in green technology as well, particularly in light-weight batteries. Current applications for zinc-air batteries (in which a chemical reaction between zinc and oxygen creates an electrical current) include hearing aids and various medical applications. They are also being tested for use in electric vehicles. ReVolt Technology has developed a rechargeable zinc flow air battery (ZFAB) to be used in hybrid electric vehicles and other consumer electronics.

As well, China and India’s testing of the use of zinc with fertilizer has yielded positive results that could brighten the outlook for the metal: the addition of one per cent zinc to fertilizer has increased crop productivity by up to 10 per cent. If adopted, in China alone, said Teck Resources CEO Don Lindsay in a recent conference call, the added demand for zinc could reach as much as 500,000 t/y.

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