Zinc demand closely correlates to steel demand. As steel demand increases so does zinc consumption. Many zinc mines shut down or went on care and maintenance last year. All now appear potentially profitable and the return to production will depend on the mining companies view of the sustainability of current prices. Zinc prices have made the most phenomenal recovery since Dec 2008, increasing some 150%.
With construction and automotive the key divers of demand, and with greater than 50% of zinc demand coming from China and SE Asia, it is not surprising that the focus for zinc has firmly shifted to Asian construction and automotive performance. On both counts, China dominates but increasingly recovery in SE Asian markets such as Taiwan, South Korea, Thailand and Indonesia, not to mention India, has spurred construction activity and demand for autos and trucks. Neither market shows any sign of slowing in the year ahead yet prices recently came off January highs with the rest of the base metals market as some of the speculative froth was withdrawn as China tightened bank lending. Fears remain that the China property market may be overheating but the reality is that while the authorities would like to restrain double digit property inflation they need the property market to continue to grow to meet housing needs later this decade so they are unlikely to prick the bubble too sharply. Car production continues to expand and is even showing some signs of growth in North America although at a projected 11.5m units in 2010 it will be a long way off pre-crisis highs.
Meanwhile mines continue to gradually increase production or come back on stream and stocks are gradually increasing in exchange warehouses. Zinc is a profitable metal to produce at current levels.
Where the price goes from here will depend on a number of factors that we cover in depth in our Zinc Price Predictions price forecast.
To learn more about our price forecasts and research you can catch us on video at the Price Forecast section of the site.