Global zinc demand surged 11% year-on-year to 11.7 million tonnes in 2010 after being severely depressed in 2009 by weak macroeconomic conditions and significant de-stocking as manufacturers reduced inventories in response to weak demand. Global vehicle production rebounded strongly in 2010, up by over 20% compared to the previous year, led by China where vehicle output rose by approximately 30% over 2009, exceeding US output levels. Chinese construction and infrastructure growth continued, providing support for zinc demand in that region, while construction activity in Europe and the US was much more muted.
McArthur River Mine in Australia.
Global refined and mined zinc production recovered in 2010 in response to higher prices. Refined production rose by 12% to 12.5 million tonnes while mined production rose by 8% to 12.1 million tonnes, following unprecedented mine and smelter cutbacks in 2008 and early 2009. Restarts, expansions and higher utilisation rates at Chinese mines and smelters accounted for just over half of the global annual increase in concentrates and refined metal. Other Asia-Pacific economies recorded higher mine and smelter output and mine output was substantially up in Australia. Elsewhere, smelter production rose significantly in Europe and modestly increased in India. China continued to be a net importer of concentrates to fulfil domestic need by smelters and metal consumers.
Average European benchmark treatment charges for 2010 were settled at $272.50 per tonne of concentrate on a $2,500 per tonne zinc price basis, compared with 2009 levels of $198.50 per tonne on a $1,250 per tonne zinc price basis. Available concentrates were converted into refined metal, tightening the supply of global concentrate balance and refined zinc output exceeded metal consumption, raising warehouse stocks by the end of 2010 to 701,425 tonnes on the LME and 310,735 tonnes on the Shanghai Futures Exchange, collectively equivalent to 31 days of global consumption.
LME zinc prices traded in the range of $2,000-2,500 per tonne for most of the year, dipping below $2,000 per tonne from May to July, reflecting a sell-off in global markets. The average LME price for 2010 was $2,159 per tonne, compared with an average price of $1,659 per tonne in 2009.
Global zinc demand is expected to grow in 2011, fuelled by strong demand in developing countries and the gradual recovery of mature economies. Continued growth from China will drive increased zinc consumption from the galvanised sector and is underpinned by vehicle production, infrastructure projects and consumer goods.
The zinc market is currently in surplus, but a market deficit is expected to emerge within the next two years as a number of existing mines reach the end of their lives in the next few years and insufficient new projects have currently been identified to satisfy the forecast growth in demand.
Global demand for lead rose by 7% to 8.8 million tonnes in 2010 compared to 2009, as strong Chinese consumption continued to drive global demand growth. Lead consumption throughout the remainder of Asia benefited from China’s strength, though this was partly offset by declining demand in debt-laden Western Europe. Chinese consumption increased by 12% year-on-year, fuelled by demand for both automotive batteries and stationary batteries used in backup power supply systems, telecommunication networks and renewal energy storage applications.
Global supply of refined lead increased by 7% to 8.8 million tonnes, with the year-on-year increase almost entirely provided by Chinese suppliers, with smaller increases from producers in India, Mexico, Canada, the US and France. The surplus between supply and demand was reflected in higher LME stocks of lead metal which ended the year at 208,275 tonnes, equivalent to just over one week of global consumption.
Global mine production rebounded by 13% in 2010 as operations expanded and temporary cutbacks were reversed to respond to improved metals prices and low treatment charges. China again accounted for the majority of increased mine production while supply also increased from producers in Australia, Mexico, India and the CIS. Availability of scrap and secondary materials, which make up just over half of the world’s feed for lead smelters and refineries, declined slightly during 2010 as the market approached equilibrium.
LME lead prices traded at between $2,000 and $2,600 per tonne for most of the year though prices dropped below this range between May and July as a result of sell-off in global markets. The average LME price for 2010 was $2,148 per tonne, 24% higher than an average of $1,726 per tonne in 2009.
Demand for lead is expected to continue exhibiting strong growth predominantly due to growing demand for lead batteries, which account for 80% of global lead consumption. Lead battery demand is set to rise as increasingly prosperous consumers in China, India and other industrialising Asian countries switch from electric bicycles to motorcycles and automobiles. Battery demand is also expected to continue to rise from industrial vehicles and mobile equipment and for the standby power requirements of large cities worldwide. Primary and secondary lead supplies are expected to exceed consumption growth in 2011 at a modest rate, followed by a deficit thereafter as existing mines are depleted at a faster rate than new projects are commissioned.