Leaders in the global zinc industry will meet in San Diego February 23-26 for the 2025 International Zinc & Zinc Oxide Conferences, the flagship event for the industry.
US premium inching up in February
With higher market activity, and in reaction to the steel tariff imposed by US President Donald Trump on February 10, the zinc special high grade (SHG) spot price in the US has slowly risen since the start of February. The zinc SHG min 99.995% ingot premium, ddp Midwest US was assessed at 18-20 cents per lb on Tuesday February 18, up from 16.50-19.50 cents per lb on February 4.
Since the start of the year, participants have largely expressed an expectation of some movement in SHG, and Fastmarkets has been hearing of this possibility since Trump’s inauguration on January 20. Some participants believe this will continue up to the IZA’s conference and beyond.
“If nothing dramatic happens, I would expect the range to be tighter before the end of the month,” one seller told Fastmarkets.
“The zinc premium is definitely moving up steadily,” a trader said.
According to Fastmarkets’ analysts, the market is cautious ahead of key events, including the IZA conference, as well as China’s Two Sessions meeting in early March.
“While zinc has rebounded from oversold conditions in early February, market participants appear reluctant to drive a stronger rebound towards $3,000 per tonne. This is partly due to macroeconomic factors including broad tariff uncertainties and expectations the US Federal Reserve will be forced to maintain a hawkish bias relative to other major central banks,” Fastmarkets analyst James Moore wrote in a February 18 report.
According to Moore, the outcome of the Two Sessions meeting could provide some clarity on broader fundamental and macro drivers.
Fastmarkets’ analysts still forecast that a recovery in concentrate supplies will support higher global refined zinc production in 2025.
“It is clear however, smelters face increasing cost pressures as energy prices remain high and spot TCs close to zero, while the demand outlook is still somewhat subdued. In light of lower guidance from several major producers we forecast metal production rising by only 0.9% in 2025, albeit lowered from the 2.9% growth previously. In addition, given the risk of greater disruptions at South Korea’s Seokpo Smelter, further delays to the Odda expansions, or greater restraint by Chinese smelters we believe downside risks remain,” Moore said on February 21.
Benchmark TCs expected to fall in 2025
Participants will be paying close attention to discussions on benchmark treatment charges (TCs), which are expected to be decided within the coming months.
The annual benchmark zinc TCs were settled at $165 per tonne in April 2024, their lowest level since 2021. Many are expecting the benchmark TC to continue to decrease, given current spot market conditions.
“I think the benchmark will definitely be settled at a new historically low in 2025 due to the concentrates supply tightness,” a trader based in Beijing said.
Market participants noted a wide spread of offer and bid between seller and buyer at the beginning of benchmark negotiations.
“I heard the miner’s initial offer came in at $50 per tonne, while the smelter bid at $150 per tonne,” a Hong Kong-based trader said.
With the global zinc concentrates supply deficit expected to ease this year, the benchmark TC may find some support from increasing raw material supply, Fastmarkets learned.
“From my perspective, the figure may be finally settled in a range between $90s to $110s [per tonne],” a trader based in Shanghai said.
Fastmarkets analysts are currently forecasting benchmark TCs to settle in a range of $110-130 per tonne.
Uptick in concentrate supply boosts market sentiment
Zinc TCs have experienced an uptick in recent weeks, after reaching all-time lows between August and November 2024.
Fastmarkets’ most recent assessment of the zinc spot concentrate TC, cif China was $0-30 per tonne on February 14, fully in positive territory for the first time since May 2024.
The expectation of increased supply has improved overall market sentiment, Fastmarkets learned.
Participants will expect updates on production from the Kipushi mine in the Democratic Republic of the Congo (DRC), which is expected to reach full capacity by the end of the first quarter 2025.
The mine has an expected annual average zinc output of 278,000 tonnes per year over the first five years, which would make Kipushi the world’s fourth-largest zinc mine, with about half of the mine’s zinc output expected to be sent to Europe.
The market also awaits further information on expected increased concentrate supply from Europe, including the Ozernoye mine in Russia and the Tara mine in Ireland.
Trump tariff effects on US SHG spot premium
Market chatter throughout the month of February has been dominated by tariff talk.
On February 1, Trump signed an executive order that introduced 25% tariffs on most imports from Mexico and Canada, as well as a rate of 10% on imports from China, to be imposed on top of existing tariffs. That policy was briefly paused, before another announcement on February 9, that the country would impose 25% tariffs on all steel and aluminium imports from February 10.
Though the current tariffs are not on zinc directly, they do concern the metal, as fifty percent of the annual production of zinc (approximately 5.5 million tons) is used for galvanizing, to protect steel from corrosion, according to the American Galvanizers Association.
Market participants have had mixed reactions about the tariffs’ possible impacts since Trump’s inauguration. One consumer told Fastmarkets that the SHG premium would rise “in sympathy” with other metals, and less due to demand. In early February, other market participants expressed fresh concerns regarding possible shipment suspensions and significant upselling.
Imported zinc accounts for approximately 75% of US annual zinc metal requirements, in large part from neighboring Canada and Mexico. This means that upstream users such as galvanizers and die-casters will be particularly sensitive to raw material cost increases or supply chain disruptions. According to Moore in his February 18 analysis, “this not only has significant inflationary implications, but also risks demand destruction.”
On Tuesday, Trump also expressed the intention to impose auto tariffs and similar duties on semiconductors and pharmaceutical imports, with levies on automobiles to come as soon as April 2.
As the nature of the tariff announcements has been fast-moving and at times dramatic, Fastmarkets expects to hear market chatter surrounding this issue at the IZA conference.
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