ZINC
An Abundance of Production
February 2019
In 2019, the zinc market—both mined refined—will enter a supply surplus for the first time in three years as additional mining and refining capacity comes online. The mining industry will see large gains in North America and Africa, while refining will see the majority of additional capacity appear in Asia. Increases in capacity will be fairly diverse.

Mined Capacity Additions

Mined zinc’s expansion is forecast to slow in 2019 but will reach a still-considerable 507kt. After significant capacity additions in 2018—most of which came from Vedanta’s 250kt Gamsberg mine—2019 will see a reduced 266kt capacity come online in total.  

The single largest mined zinc increase will come from the Asmara copper-zinc polymetallic mine in the country of Eritrea, which is predicted to produce an annual average of 65 million pounds of copper, 184Mlb of zinc, 42koz of gold and 1Moz of silver during the first eight years, with an estimated mine life of 17 years.

2020 will see new mined capacity almost triple from 2019’s rate of increase, entirely from two large-scale projects: the Chinese Huoshaoyun 590ktpa and DRPC’s 270ktpa Kipushi mines.

The next two years may also see several mine restarts and a slew of existing site expansions as costs decrease and prices stabilize in an upside scenario. These are not concentrated in any specific region, however, and no individual restart or expansion will add triple-digit capacity.  

 

 

In addition to confirmed base case additions, significant upside potential exists across 2020 and beyond, particularly if zinc and lead prices begin to recover from the end-of-2018 dip—as with other metals, largely caused by overhanging trade tensions. 495kt of additional non-base-case capacity is considered to be in the concept stage, pending further analysis of market movements.

 

Refined Capacity Additions

2019 has no confirmed new sites, but refining expansions will see four relatively small site expansions totaling 104ktpa, and 2020 will see a similarly-low five confirmed expansions with a total 109kt capacity—with expansions over both years largely carried out at Hindustan Zinc projects as it fights to keep its place as the fourth-largest finished zinc producer.

In contrast to 2019’s absence of new projects, 2020 will see the combined startup of 170kt of capacity at the 100kt Yunnan Hualian and 70kt Karachipampa sites in China and Bolivia respectively.

Possible new smelter projects not included in AME’s base forecast include Ural Mining and Metallurgical’s 150ktpa Kirovgrad, and Chesapeake Gold’s 90ktpa Metates. The Kirovgrad smelter was originally anticipated to be built in the Sverdlovsk region of Russia at a capital cost of US$650m but development no longer appears likely.

Similarly, Xinjiang Guanghui’s 574ktpa smelter project was forecast to be commissioned over 2019/2020, but construction and development of the smelter has now stopped. Progress on the smelter has been delayed multiple times due to permitting issues as a result of environmental concerns, and a final commissioning date is uncertain.

The project was intending to source a bulk concentrate from Xinjiang Guanghui’s 590ktpa Huoshaoyun mine that has also been delayed. Construction capital expenditure for the smelter is estimated to be CNY5.47bn (US$800m).

 

 

Lead

The Hermosa zinc mine will be the only significant lead base-case addition in the short term, coming online in 2021 and producing 230ktpa. Other mines will come online producing lead as a minor by-product, and the Alaigyr lead concentrate and processing project in Kazakhstan stands to produce 45ktpa of lead when it comes online this year.

The only other significant single source of possible supply in the next two years is the prospective Aripuana Zinc mine, which is a possible addition to short term supply. Construction has begun, though later than initial estimates, and if feasibility study projections are accurate the project will begin production in late 2020 or early 2021.