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Prices averaged $2995/ton in 2021 and closed the year around $3428/ton, a slight retracement from the high of $3944/ton reached in October 2021.
Fitch’s price forecast for 2022 implies that the company expects prices to stabilize and weaken from here on in the coming months, although they remain high by historical standards.
On the demand side, strong consumption in the steel sector will continue to drive zinc demand in the coming months, although demand growth will begin to slow. Fitch expects global crude steel production growth to average similar levels in 2022, suggesting similarly robust growth in galvanized steel production, which is the main source of zinc demand.
Global refined zinc production remains under pressure, as major producers Nyrstar and Glencore have announced production cuts due to the energy crisis in Europe. Chinese production has begun to stabilize after being hampered by government-imposed energy rationing in Yunnan province, but production has not yet returned to past levels.
Strong zinc mine supply growth will come from expansions and restarts by key producers including Peru, Australia and Canada, which in turn will boost downstream refined zinc production.
An average annual production surplus of 476,000 metric tons is expected in the 2026-2030 period, compared to 203,000 metric tons in the 2021-2025 period. Zinc prices will be pushed down by long-term production growth outpacing consumption growth.
The most significant drag on global zinc demand growth will come from China, which accounts for about half of annual refined zinc consumption. Fitch expects China’s steel production growth to slow from an annual average of 5.5% over the 2018-2022 period to just 1.3% over the next five years.
As a result, China is expected to move from being a major net importer of refined zinc, as has been consistently the case over the past decade, to becoming a major net exporter.
