Zinc & Lead
Falling Away
August 2018
The trade dispute between the US and its trading partners, particularly China, are expected to dampen prices over the September Quarter period. Potential upsides in the market balances—and, in turn, zinc prices—could stem from a relaxation in galvanised steel tariffs, a delay in the commissioning of Vedanta’s 250ktpa Gamsberg, or an easing in Chinese environmental protection policies.

The zinc price continued its downward trend in July, falling to a low of US$2,502/t (US$1.13/lb). The zinc price had not been at this mark since June 2017. The month-average zinc price in July was US$3,089/t (US$1.40/lb), 14% lower than the month prior. Zinc and base metal prices in general, declined over July due to concern about the impact on global economic growth of trade disputes between the United States and its trading partners, particularly China. LME stocks were almost unmoved over July, falling just 4% to 240kt. SHFE deliverable stocks fell 41% to 48kt, which may have stemmed from ongoing smelter maintenance in China.

Despite the threat of tariffs, Chinese producers are commissioning new production lines. During July, Baosteel commissioned its new aluminium–zinc 200ktpa hot-dip galvanising line at Huangshi. Baosteel is expecting the new product will be used by downstream consumers for building materials, household appliances, transport equipment and communication equipment.

Spot treatment charges (TCs) for imported zinc concentrate into China traded at US$15–25/t in July, unchanged from June, but approximately 87% lower than the 2018 benchmark of US$147/t. Over the second half of 2018, AME is expecting spot TCs to rise as additional concentrate supply enters the market from operations including MMG’s 170ktpa Dugald River, Trafigura’s 50ktpa Castellanos and New Century’s 270ktpa Century.