Zinc could be on a path to new highs?

Zinc is literally everywhere. It is in us, in the earth’s crust, in the buildings we build, in the batteries of our electronic vehicles. The earth’s crust contains about 75 ppm (0.0075%) of zinc, making it the 24th most plentiful element.

Before the day we are born, western medicine practitioners recommend mums to be, to take a prenatal supplement that will contain added zinc. It is one of the most effective minerals to take alongside Vitamin C to help prevent catching a common cold and generally boosts your immune system. In 2020 President Trump declared that he had been taking a zinc supplement daily to protect himself against the novel coronavirus, which although did not prevent him from contracting the disease, may have helped in the miraculous speed in his regain to full health.

Of the four most used metals, zinc comes in 4th behind, iron, aluminium, and copper and according to a United States Geological survey the annual production of zinc amounted to approximately 13 million tonnes. Zinc does not degrade and 30% of all production comes from recycling, with the Special High-Grade zinc coming straight from the mine. And according to the International Zinc Association, they estimate that 60% of all produced zinc is still in use.

The largest exploited deposits are found within China, Australia, and Peru, which makes sense when considering where you find Copper you also find other base metals such as zinc.

Extracting Zinc from the dirt is a process known as extractive metallurgy, which results in a zinc sulfide which is then roasted to create a zinc oxide. The bi-product of the zinc oxide is, which itself is used in creating sulphuric acid. The sulphuric acid plays a part in leaching zinc from ore concentrate before being recycled after electrolysis, leaving the zinc reduction.

The limited storage sulfur dioxide capacity of sulphuric acid at the smelters is a bottleneck that can impede the production of zinc. The big consumers of sulphuric acid like the fertiliser industry were obviously affected by the economic lockdowns during 2020, so the smelters at one point would have had to balance producing zinc or waiting for demand in sulphuric acid to pick up and also having enough employees to truck the acid off-site, in doing so, making further room in their capacity to store the acid.

China is by far the largest consumer of zinc, with over 50% share of the market, with the USA coming in second but only using 7% of the total stock. Zinc consumption is 60% used in galvanising, 13% in die-cast alloys, 11% Brass and the rest in semi-manufacturing products, oxides and chemicals.

Zinc’s usage within galvanised steel makes it heavily correlated to the construction industry and to a lesser extent the transportation industries. Due to the covid-19 situation and China’s dominance in the zinc market, global zinc consumption dropped by 5.5% in 2020 but so far in 2021, there has been a 4% rise in consumption.

In 2019 inventories of zinc had risen as miners produced more and sold into the market as the price of zinc rose to trade as highs as $3,500/tonne. With the slowdown in inventory build during the Chinese lockdown, supply remains quite tight as the 2020 levels did not get above the prior 6-year average and 2021 levels are only slightly higher than 2020 year-on-year. Supply should rebound in 2021, as the word is that there is a reflation trade. China’s stimulus policies have a lot of influence over the zinc and base metals market as depending on whether they go the infrastructure route or the tax cut route changes on how much demand is created for the metals or for consumers to spend.