Market analyst BMI has maintained its zinc price forecast for this year at $2 650/t owing to weaker supply and demand dynamics; however, refined zinc production will likely trend higher this year following a contraction in 2024.

BMI reports that zinc prices started the year at a robust $2 888/t, however, it anticipates a 5.8% drop compared with the average price of $2 812/t last year – owing to tightening market fundamentals as a shortage in zinc concentrate has constrained refined output.

BMI says refined zinc production will likely have a surplus of 270 000 t this year, following a 184 000 t expected deficit in 2024, as supply growth outpaces demand.

Global refined zinc production for 2024 is estimated to have dropped by 0.7% year-on-year from 13.9-million tonnes in 2023 to 13.8-million tonnes in 2024.

The firm explains that broader market headwinds could exert additional pressure on zinc prices this year, including an uncertain economic growth outlook for mainland China and the re-election of Donald Trump as President of the US, which could contribute to considerable volatility in the market on the back of his proposed trade policies.

BMI explains that Trump’s plans are driving a renewed expectation of a stronger dollar this year, on the back of elevated inflation and potential currency devaluation in countries affected by tariffs. He is due to take office from noon on January 20.

Meanwhile, BMI forecasts zinc prices will average $2 700/t in the longer term, between 2024 and 2028, which is below the 2022 average price of $3 440/t.

SUPPLY

In terms of supply, BMI expects the zinc market to be in surplus between 2024 and 2033; however, this will peak at about 578 000 t in 2027 before zinc demand will likely tick up on the back of clean energy transition activity.

For example, zinc is used in making vehicles more lightweight and thereby more fuel efficient, as well as for corrosion protection in wind turbines and solar panels.

BMI elaborates that several major zinc smelters across mainland China agreed to reduce concentrate demand, delay capacity expansion plans and increase the use of secondary materials in 2024.

This coordinated action aims to mitigate the impact of unfavourable treatment charges.

These strategic measures are expected to contribute significantly to the projected decline in global zinc output for 2024.

Outside mainland China, production declines in several countries, including Peru, Canada and the Netherlands, will contribute to the global downturn. Europe shows some upside potential, albeit with persistent risks in certain areas.

“Our outlook for 2025 is more optimistic, with production expected to rebound by 5.1%. This growth is anticipated to stem from the restart of suspended mining capacity and the completion of expansion projects at key mining operations,” BMI states.

DEMAND

BMI projects global refined zinc consumption grew by 2.2% year-on-year in 2024 and will grow by another 1.7% year-on-year in 2025, mainly owing to increased demand in mainland China’s construction sector despite its struggling property sector.

China’s construction industry accounts for about 50% of global zinc consumption, with the industry using galvanised steel for corrosion protection.

India is also expected to contribute to demand growth owing to increased public infrastructure spending.

BMI expects growing demand from clean energy technologies to provide significant upside for zinc, particularly in mainland China, which will mitigate the impact of its property sector weakness.