Top players in the global metals industry have predicted that zinc supplies will struggle to fulfill demand next year. During the recent SMM Metal Industry Annual Conference, analysts predicted that zinc supply may see increased pressure in 2024 despite an unexpected increase in zinc production in 2023.
The 2023 SMM Metal Industry Annual Conference was sponsored by the Shanghai Stock Exchange and Chongqing Jiangjin District People’s Government.
SMM senior zinc analyst Han Zhen noted that this year’s unexpected rise in refined zinc production may rise even further in 2024 amid high zinc imports. Zinc has applications in everything from medicines and rubber to metal products. The majority of the world’s zinc supply is combined with other metals to make alloys or used to protect steel and iron through galvanization.
Auxiliary metal prices in China have fallen through the year amid unexpected increases in local zinc production. There was a surge of imported zinc inflows in Q2 2023 when the zinc concentrate window opened, and experts predict these inflows may remain high into 2024.
On the other hand, zinc ore production outside of China’s borders did not reach expected levels. However, they are expected to surge next year. Research from SMM found that lower-than-expected overseas zinc ore production levels were due to factors that affected Mines in Canada, Australia and Peru.
Volcan, a zinc-lead miner in zinc production giant Peru halted operations at the Islay mine in July. Conflicts between local communities and zinc mining companies in Peru paralyzed operations at key locations such as Atacocha, Cuajone and Yauricocha, causing zinc production to drop even further.
The steady decline in zinc prices in China has significantly reduced the incentive for local miners to produce zinc and may reduce their appetite for the metal even further in 2024.
On the other hand, zinc ore imports into China have increased since early 2023 and have been especially high since July when the zinc concentrate import window opened. Customs data shows that zinc ore imports into China went up by 23% year-over-year from January to September, and experts predict zinc import volumes will remain high through the rest of the year and into 2024.
China is the largest global zinc consumer by a wide margin and supplies most of this appetite via local production. However, with experts predicting lower zinc production levels next year, increased Chinese imports may squeeze the global zinc supply chain.
Exploration companies such as Arizona Metals Corp. (TSX: AMC) (OTCQX: AZMCF) could go a long way in ensuring that new production is brought online so that future demand for zinc can be met.
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