Global mined zinc production will ramp up in 2018, as strong zinc prices prompt miners to bring idled capacity back online. Fitch Group company BMI Research has forecast global mined zinc production to increase by 3.5% y-o-y in 2018, to 13.7 Mt, and rise to 16.6 Mt by 2027.
While some capacity taken offline over 2015 – 2016 was due to permanent mine closures, the return of some stalled capacity and new projects in key countries will drive growth over the coming quarters.
Vedanta Zinc International is bringing a new US$400 million zinc mine on stream in South Africa in the Northern Cape, and is due to start production towards the middle of 2018 from which it will ramp up to process 4 Mtpa of ROM material.
China’s zinc production will stagnate due to declining ore grades and increasingly stringent environmental regulations. The conservation of minerals and increasing consolidation of mining industries outlined in China’s 13th Five-Year Plan will weigh on zinc output in China.
Additionally, the strong support for state-owned enterprises (SOEs) in the plan will ensure that China’s zinc industry remains dominated by SOEs, with increasing consolidation of smaller miners.
Since August 2017, operations at about 60% of zinc and lead mines in Sichuan province have been suspended due to ongoing environmental inspections. This is the fourth batch of environmental inspectors who have stationed themselves in eight provinces, namely Sichuan, Tibet, Qing hai, Xinjiang, Jilin, Zhejiang, Shandong and Hainan, which together accounted for 11.4% of China’s mined zinc output in 2016.
Despite higher zinc prices this year, Chinese zinc smelters have cut output due to tight concentrate supply, with the shortage expected to last into the next one to two years.
BMI forecasts the country’s zinc production to edge higher, from 4.6 Mt in 2018 to 4.7 Mt by 2027, averaging 0.3% annual growth.
Despite this muted growth rate, China will remain the largest global producer of zinc by a wide margin, accounting for approximately 34% of total output in 2018. Dominant producers will include domestic miners such as Zijin Mining, which plans to produce 274 000 t of zinc in 2018.
Australia’s zinc sector will gradually recover from the H2, 2015 closure of Minerals and Metals Group’s (MMG) Century zinc mine, as rising prices prompt miners to restart major operations.
BMI has revised up its zinc production growth forecast for 2018 and 2019, to 12% and 8% respectively, based on plans for New Century Resources to restart production at the Century mine in Q3, 2018. The firm, previously Attila Resources, acquired the mine from MMG in 2017 and expects the operations to be among the lowest cost globally, averaging C1 costs of US$0.4/lb ($838/t).
Additionally, Glencore announced plans to restart the idled Lady Loretta zinc mine in H1, 2018, with 2018 output expected to total 100 000 t and MMG’s $1 billion Dugald River, began production in November 2017 and will add an estimated 170 000 t of zinc annually at full capacity.
India will increasingly drive global zinc production growth, as the country’s key miner Hindustan Zinc Limited (HZL) implements a large-scale expansion plan. In the three quarters ended December 2017, the firm reported a 28% y-o-y increase in integrated zinc production (mined and refined) as the Rampura Agucha mine transitions from an open-cast mine to underground operations.
BMI maintains a solid production growth outlook for the country, forecasting zinc output to increase from 783 000 t in 2018 to 1.7 Mt by 2027. The company’s Rampura-Agucha zinc-lead mine in Rajas than is the world’s largest zinc mine, with reserves of more than 110 Mt and a mine life of over 25 years. HZL, 64.9% owned by Vedanta Resources, accounts for approximately 90% of India’s zinc output.
BMI forecasts Peru’s zinc output to total 1.4 Mt in 2018 and increase to 1.9 Mt by 2027, averaging 2.9% annual growth. In 2017, Glencore reported a significant increase in zinc production at the Antamina mine, totalling 128 000 t compared to 66.8 000 t in 2016 (reflecting Glencore’s 33.8% stake), citing a higher proportion of copper/zinc ores being mined.
Glencore holds a 33.8% stake in Antamina along with BHP Billiton, Teck Resources and Mitsubishi Corp. Also in 2017, Canada-based Trevali Mining reported a 13.4% y-o-y decline in payable zinc production at the Santander mine, to 24 100 t, however continues to advance the Magistral North ramp development to access higher-grade zinc-lead mineralisation. The firm expects 2018 payable zinc production at the Santander mine to be slightly higher, between 24 500 and 25 900 t.