London Metal Exchange (LME) zinc prices in the second half of FY22 are likely to hover between $3,000 and $3,600/t supported by production cuts in Europe. Mitsui Kinzoku forecasts that prices will move in the range of $3,000-3,600/t with $3,300/t as the centre range.
Currently, there is concern about a slowdown in the global economy due to monetary tightening in various countries, However, the risk of production cuts in Europe will keep prices supported, as per Japan Metals Daily.
The global supply-demand balance of zinc has been in equilibrium from January to July with a slight surplus, but it is expected that supply will shrink in the second half of 2022.
“In China, demand surges in early spring every year, but this year it was suppressed due to the lockdown. There is concern that demand will be suppressed due to the effects of monetary tightening in various countries, but even taking this into account, we expect the global supply-demand balance to turn into a supply shortage in the second half. Zinc global inventories have remained at low levels, which will have a positive impact on prices”, Kenji Sugawara, Zinc Unit Sales Manager at Zinc & Lead Division, said.
Europe production cut impact
The risk of production cuts in Europe due to electricity problems has been a continuing theme since last year, and has become even stronger due to the worsening energy problems after the Ukraine crisis.
That concern could grow even stronger as we head into winter.
In addition, “… last month, some smelters in Europe announced that they would suspend operations, but due to the effects of monetary tightening, some smelters will not be able to sustain production if the price stays below $3,000/t for a prolonged period”, SteelMint understands.
So, there is limited room for prices to fall, and it is difficult to imagine that prices will continue to fall below $3,000/t. In fact, as long as the risk of production cuts due to electricity problems continues, the price environment will continue to be prone to upward swings.
Rest-of-2022 outlook
It is difficult to forecast because there are fluctuations such as when zinc prices would settle down due to economic factors accompanying monetary tightening and power problems. But basically there is an apprehension of supply shortage.
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