622
C. Hassall
Over the next five years, we see a shortage of refined zinc production capacity
as the major issue facing the industry, perhaps no surprise given the acute, though
short-lived, shortage of raw material supplies following the permanent closure of the
Century and Lisheen mines in 2015/16, and Glencore’s temporary cuts in 2015 which
took close to 1 Mt of zinc in concentrate production out of the supply chain in 2016,
compared with 2014. Zinc treatment charges were pushed down to historically low
levels as a consequence, though higher zinc prices did compensate smelters for some
of the revenue lost as a result through the higher value of the free zinc component of
their revenue streams. Nonetheless, the narrative at the time of a prolonged period
of low zinc TCs may have delayed much needed zinc smelting projects.
Looking ahead over the next 3–4 years, we do not see a shortage of raw materials
restricting refined zinc supplies, with the global zinc concentrate market now in
substantial surplus. Zinc, lead, copper, and silver prices are still high enough to ensure
ongoing profitability (albeit at considerably lower levels than enjoyed in 2015–2018)
even with higher treatment charges. Only a major weakening of metal prices would
likely lead to significant mine closures. However, for more marginal mines, losses
may emerge forcing cutbacks and there remains the question of whether all zinc
concentrates now being produced are able to secure customers on acceptable, or
indeed, any terms. Concentrate quality and the ability or willingness of the existing
zinc smelting capacity to treat more complex materials is increasingly a factor in
determining treatment terms.
In conclusion, we expect to see some significant changes in the pattern of regional
demand over the next 4–5 years, necessitating increased investment in expanding zinc
smelting/refining capacity outside China. In addition to expanding capacity, more
complex raw materials, the need to comply with tightening environmental standards,
and enhance smelter revenues will necessitate investment in equipment upgrades and
greater ability to recover a wider range of saleable by-products.
C. Hassall
Over the next five years, we see a shortage of refined zinc production capacity
as the major issue facing the industry, perhaps no surprise given the acute, though
short-lived, shortage of raw material supplies following the permanent closure of the
Century and Lisheen mines in 2015/16, and Glencore’s temporary cuts in 2015 which
took close to 1 Mt of zinc in concentrate production out of the supply chain in 2016,
compared with 2014. Zinc treatment charges were pushed down to historically low
levels as a consequence, though higher zinc prices did compensate smelters for some
of the revenue lost as a result through the higher value of the free zinc component of
their revenue streams. Nonetheless, the narrative at the time of a prolonged period
of low zinc TCs may have delayed much needed zinc smelting projects.
Looking ahead over the next 3–4 years, we do not see a shortage of raw materials
restricting refined zinc supplies, with the global zinc concentrate market now in
substantial surplus. Zinc, lead, copper, and silver prices are still high enough to ensure
ongoing profitability (albeit at considerably lower levels than enjoyed in 2015–2018)
even with higher treatment charges. Only a major weakening of metal prices would
likely lead to significant mine closures. However, for more marginal mines, losses
may emerge forcing cutbacks and there remains the question of whether all zinc
concentrates now being produced are able to secure customers on acceptable, or
indeed, any terms. Concentrate quality and the ability or willingness of the existing
zinc smelting capacity to treat more complex materials is increasingly a factor in
determining treatment terms.
In conclusion, we expect to see some significant changes in the pattern of regional
demand over the next 4–5 years, necessitating increased investment in expanding zinc
smelting/refining capacity outside China. In addition to expanding capacity, more
complex raw materials, the need to comply with tightening environmental standards,
and enhance smelter revenues will necessitate investment in equipment upgrades and
greater ability to recover a wider range of saleable by-products.