Monsters zinc: what happened in 2023?

For anyone plugged meaningfully into the global zinc market, 2023 might be a year they want to forget.

At US$2,389 per tonne, the price of zinc has — as of 11 December 2023 — fallen more than 26% since the start of the year, with strong production and weak demand leading to a widening surplus.

Often mined in association with lead, copper and silver, zinc’s usage can be traced to, at the very least least, 20 BC and its role in the production of brass. These days, roughly 60% of mined zinc goes towards galvanising steel against corrosion, while some 13% is used in die-casting alloys. It retains its role in brass production and is also used in chemicals and nutritional products.

At a meeting in October, the International Lead and Zinc Study Group’s (ILZSG) statistics committee reversed its April prediction that the global zinc market would register a minor supply deficit of 45,000 tonnes in 2023.

It now expects supply will exceed usage by 248,000 tonnes before increasing to 367,000 tonnes in 2024.

“After rising by only 0.1% to 12.43 million tonnes in 2023, world zinc mine production is forecast to increase by 3.9% to 12.91 million tonnes in 2024

“After rising by only 0.1% to 12.43 million tonnes in 2023, world zinc mine production is forecast to increase by 3.9% to 12.91 million tonnes in 2024,” the ILZSG said.

The 0.1% rise this year came largely from China, India, Mongolia, Peru and Russia, where the 345,000-tonnes-per-year Ozerny mine in Buryatia recently began production ahead of a scheduled ramp-up next year.

“In 2024, substantial increases in Australia and the Russian Federation will be the main driver of the forecast rise in mine production. Output is also predicted to increase in Bosnia and Herzegovina, Brazil, China and Mexico,” the ILZSG added.

But how, exactly, those predictions turn out in the uncertainty of real life remains to be seen.

When the price of zinc hit a three-year low of $2,215 in May, it triggered a string of mine closures around the world, with Macquarie Bank analysts at the time estimating a production wipeout of 300,000 tonnes annually.

It began with Sweden’s Boliden (STO:BOL) in June, which curtailed the output of its Tara mine in Ireland.

Australia’s privately held Aurora Metals went into voluntary administration later the same month (not to be mistaken with listed uranium hopeful Aurora Energy Metals (ASX:1AE)), putting the Mungana and King Vol mines in Queensland on care and maintenance, which are now for sale.

Aeris Resources (ASX:AIS) suspended operations at its Jaguar mine in Western Australia in August, and Almina-Minas do Alentejo shuttered its Aljustrel mine in Portugal a month later.

“Between the operational challenges, lower zinc price and cost inflation it became obvious that the best value for our shareholders was to pause production at Jaguar,” Aeris Resources said in a statement on 2 August.

“Jaguar has a significant metal inventory across four deposits, and an underutilised processing plant. Leaving the metal in the ground until we have an optimised restart plan, at higher production rates, was clearly the better alternative than continuing a loss-making operation. We will now commence feasibility work on restart options.”

The trend continued into late-2023, with a proposed shutdown by Netherlands-based Nyrstar (EBR:NYR) — a wholly owned subsidiary of trading and logistics company Trafigura — of two zinc mines in the US state of Tennessee at the end of November. Nyrstar has not provided an update on the planned closure.

On 13 November, CBH Resources said it was no longer in a position to invest in the further development of its Rasp zinc, lead and silver mine in Broken Hill, New South Wales.

“The Broken Hill Operations (BHO) will move to a staged closure during 2023/24 and fulfil the rehabilitation obligations beyond this period,” the company said.

“During this transition period CBH is actively seeking a new owner for the Rasp mine, who can execute the potential development of the remanent [sic] Northern Main Lode and Centenary deposits.”

Despite the expanding list of mine closures, analysts at Edinburgh-based Wood Mackenzie noted at the start of November that zinc production had remained resilient in the face of low prices.

“Over the next few years we expect steady growth in zinc mine production — approximately 1.5Mt of new mine production is planned from 2023 to 2026,” Andrew Thomas, Head of Lead and Zinc at Wood Mackenzie, said.

Zinc smelter production is also set to recover, but high energy prices, carbon taxes and carbon abatement costs are expected to affect long-term margins.

The refined zinc market, meanwhile, is likely to enjoy a bounceback in 2024, which, combined with a more positive sentiment, could drive near-term zinc prices higher.

Write to Oliver Gray at Mining.com.au

Images: Aeris Resources
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Written By Oliver Gray
Originally from Perth, Oliver has a keen interest long-form journalism. He has written for a number of publications and was most recently Contributing Editor of The Market Herald’s opinion section, Art of the Essay.