Leaders in the global zinc industry met in San Diego February 23-26 for the 2025 International Zinc & Zinc Oxide Conferences, the flagship event for the industry.
Discussions were focused on uncertainties in the US refined zinc market due to President Donald Trump’s tariffs, the Chinese economy and zinc demand, and the ongoing volatility in the zinc concentrate market.
Chinese demand for zinc remains strong despite poor economic data
According to Duncan Hobbs, research director for Concord Resources, the rally in the London Metal Exchange zinc price in the late 2024 was driven by an anticipation of policy change to support domestic consumer demand in China.
China’s zinc metal demand was strong in 2024, but certain positive data points have been overwhelmed by headlines reporting slower growth in the economy, Hobbs said.
“I think… Chinese zinc demand for last year was strong,” Hobbs said.
“I think what’s happened… is that people’s perception of the market condition has been overshadowed by evidence on the Chinese economy where… you see growth slowing [and] consumers struggling but when you look at more zinc metal specific data… on things like solar… the data is pretty good and better than you might imagine,” Hobbs said.
Jonathan Leng, principal zinc markets analyst at Wood Mackenzie, said, “zinc consumption is not necessarily a reflection of the wider woes of the Chinese economy,” adding that he expects Chinese zinc consumption to grow by 2.5% this year due to growth in the manufacturing and infrastructure sectors.
Michael Cuoco, head of metals for StoneX, highlighted that consumer confidence in China was low, capping demand for zinc in downstream industries.
Uncertainty in US market
Like many market participants in attendance, Cuoco spoke on current volatility in the US market, echoing sources regarding the “concern and uncertainty in the market every day.”
In addition to tariff talk, Cuoco also cited the debate on the US dollar, equity market stability, confusion from market participants on how best to make investments in the present moment and possible outcomes of the war in Ukraine.
Cuoco had maintained what he referred to as a semi-bearish and cautious outlook in November at the previous IZA last conference, and he, like many, does not believe zinc is out of its moment of uncertainty.
But according to Cuoco, current positives in zinc include continued global economic growth, an emphasis on the energy transition and growth in the digital economy. He said there are potential signs of stabilization in China amid lowered consumer confidence, citing a possible build up in the military sector and a bottoming out of construction activity.
There are conflicting expectations in 2025, according to Cuoco, and sources have also commented in recent days about the volatility in the market, which is believed to be nowhere near evening out for 2025 with so many unknowns at play.
“Zinc is lacking a story,” one market participant said, and the hesitance and confusion this has caused in the market has been palpable amid market chatter.
Other participants during the conference expressed the belief that market tightness will be supportive of higher zinc prices, which Fastmarkets has noted over the last few weeks as the special high grade (SHG) spot price has slowly tightened upward during the month of February. Trump’s election win brings potential risks to demand, sources agree, with supply risks likely to outweigh demand moving forward.
“It’s a wait-and-see in North America,” another participant said.
Meanwhile, Leng noted that a stronger dollar, along with speculative interests, were key factors driving the zinc price in 2024.
“Dollar strength will be an important factor in the future… if we do get tariffs, then that will cause only short term dollar strength, but in the medium-to-longer term the tariffs will probably… impact on US treasuries and cause the dollar to soften, which will have that result on base metal prices,” Leng said.
“I think what is certain is that… if there are tariffs imposed [there will be] higher costs for US consumers and manufacturers,” Leng said, noting that 77% of zinc consumed in the US last year was imported.
But Leng added that due to zinc being classified as a critical mineral in the US, he expected that any tariff placed on zinc would be at most 10%.
“US consumers can manage with a higher [price] of zinc but it’s obviously going to have some impact… and if it’s sustained, then it will have a dampening effect on zinc demand,” Leng added.
Raw materials shortage could continue in 2025
Global zinc mine output has continued declining over the last year, with 2024 mine output about 3% lower than the previous year, following a string of mine closures in 2023.
“We’re heading for the lowest level of zinc mine output globally since the global financial crisis … [this is] why treatment charges [TCs] have moved to such low levels over the course of the past year or so,” Hobbs said.
He also noted falling zinc oxide production and rising smelting capacity had contributed to the significant drop in TCs during 2024.
Fastmarkets assessed the zinc spot concentrate TC, cif China at $(50)-(20) per tonne between August 30 and November 29 last year, its lowest level since the price was launched in 2014.
“2023 was really a critical turning point for the concentrate market; with the [refined zinc] price getting down to $2,200 [per tonne] we saw about 800,000 tonnes of mine production removed from the market,” Leng said.
Market participants are awaiting expected increased capacity to come from large mining projects such as Kipushi in the Democratic Republic of the Congo (DRC) and Ozernoye in Russia, but others have concerns about the extent to which these projects will ease current supply deficits.
“[For material from] Ozernoye… there is a big issue there with the difficulty liberating the minerals because of the fine grain size…. There’s definitely the potential for much lower production than we’ve expected and also lower quality. If it’s too low, it could make it unmarketable,” Leng said.
Increased smelting capacity also contributed to the significant drop in TCs in 2024.
Smelting capacity, particularly in China, has risen substantially in recent years, with Hobbs estimating that Chinese smelting capacity has increased by 500,000 tonnes in the past three years.
“Theres not really any shortage of smelting capacity… until we get to about 2035,” Leng said, adding that approximately 11% of smelters were operating at a cash loss in 2024.
“We need about 4 million tonnes of new mine production by 2033,” Leng said, noting that this increased capacity will most likely come from mine-life expansion.
Zinc consumption to grow slightly in 2025, supporting higher prices
Leng expected that the zinc price would gradually increase in 2025.
“We estimate currently [that stock levels are] about five days of global consumption… this should provide some fundamental support to the zinc price in 2025,” Leng said. “If funds get back into base metals and fundamentals move as we expect, then [we estimate a] $3,400 [per tonne] average [zinc price for 2025].”
Leng also predicted a 2.5% increase in global zinc consumption this year and a 2.6% increase in 2026, supporting higher zinc price levels.
But this increase is not globally reflected, and Wood Mackenzie is forecasting European demand to grow by just 1%, with the bulk of that growth coming from Southern Europe.
“Germany is in pretty poor shape, but overall we see manufacturing improving in Europe,” Leng said.
Due to continued slow demand growth in Europe and the expected increased capacity from Boliden’s Odda smelter, which is due to come online in the first quarter of this year, Europe could face an oversupply problem over the next few years, Leng said.
“The US is structured short and would be a possible location for some of that surplus European zinc,” Leng added.
Presenters at the IZA conference also noted how geopolitical factors could shape zinc demand in the coming year.
“I don’t think you can underestimate what could happen in Ukraine… if the war stopped [and there is] the rebuilding effort,” Cuoco said.
While participants heard about potential demand growth for zinc due to growing industries such as the battery sector, zinc’s use in galvanized steel remains key for global demand.
“Steel remains the driving force of the zinc market… not the energy transition,” Leng said.
“We’ve only got about 1.4 million tonnes of annual zinc consumption over the next 20 years, so [the energy transition] will give a boost to consumption but it’s not a driving [force] of the zinc market,” Leng added.
(The 36th paragraph erroneously stated Leng’s prediction regarding European oversupply was for 2025 when this report was first published. This has been corrected to be over the next few years.)
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