Is Price of Zinc at a Turning Point?

“We are monitoring zinc closely. If zinc stays below $1.40 for a period of time, Nucor (and perhaps others) would have to reduce zinc on some of their contracts.  If that happened, I’d expect spot extras to follow,” commented one service center executive to Steel Market Update.

The price of zinc has been trending up for more than two years, but analysts at the CRU Group predict the market is at a turning point. “We believe that zinc’s price will continue to trend lower in first-half 2018 and for the next two to three years,” said CRU’s Ryan Cochrane, research manager for lead, zinc and precious metals. 

The price pressure on zinc since February has been driven by several factors, Cochrane said, including the stronger dollar. The global refined zinc market has been in a deficit, but should return to balance in the second half of this year as new mine supply comes on stream from such projects as Dugald River, New Century Tailings and Vedanta’s Gamsberg mine. Smelter closures and production cutbacks in China earlier this year caused some tightness in the market, but CRU expects the Chinese to increase utilization rates later this year.

“Investors have already lost interest in zinc’s bull story and, barring any serious supply-side shocks, we expect global demand growth to slow this year and to remain modest for the next two or three years,” Cochrane said.

How long before shifts in the price of zinc translate into changes in the mill extras? “Considering prices ran up quickly in second-half 2017 and have now run down quite quickly since February, it remains to be seen what the lag will be to the flow through of zinc to coating extras. By all accounts, we are still at higher prices than the average 2017 price,” Cochrane said.

Lisa Reisman, executive editor of MetalMiner, is not yet convinced that zinc has taken a turn from the long-term uptrend that began in 2016. “Zinc prices saw a big price pullback this past month. However, trading volumes do not appear to heavily support the downtrend. Rising global zinc inventories, as well as trade talk, have led the recent price retracement. If zinc prices fall for a second month, that could shift market dynamics, but as of late June MetalMiner views the retracement as only a correction and not a new trend.”

Both MetalMiner and the CRU Group will be presentating at this year’s SMU Steel Summit Conference on August 27-29, 2018 in Atlanta. For more information about the conference and how to register please go to: www.SteelMarketUpdate.com/events/steel-summit