The Australian-based forecaster believes the metal’s price robustness will be sustained through a smaller-than-expected world zinc metal surplus and the drawdown of LME stocks in 2000, and it has estimated an average price for this year of $US1220 per tonne (US55.5c per pound) compared with $US1077/t (US48.9c/lb) in 1999.
Producers have not been slow to respond to the lag in supply. Apart from the commissioning of Pasminco’s Century mine in Queensland, which is projected to yield annualised output of about 500,000t of contained zinc and 40,000t of lead, additional supply is expected to be generated by majors including Anglo American (at its Lisheen mine), Noranda (Bell Allard) and Cominco (Red Dog). Coupled with this is the imminent start-up of new mines such as George Fisher, Antamina, Fra and Rey da Plata in the next two years.
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The Century port facilities in north-east Queensland.
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The saving grace for the zinc market has been the closure of a number of older mines. Hellyer in Tasmania will close this year, followed by Polaris (Canada) in 2001. Other mines on the chopping block include Sullivan (Canada), Selbaie (Canada), Reocin (Spain), Laisvall (Sweden) and, by 2006, Broken Hill (Australia).
Among the western world’s producers of refined zinc, the largest are increasing their market share. Pasminco’s share of western world output has risen from 9.2% to 11.3% via its acquisition of Savage Resources and its Clarkesville refinery in the USA and higher output from its Hobart and Budel operations. Korea Zinc has built up to 9% due primarily to the completion of an expansion at its Osnan refinery.
Korea Zinc will produce approximately the same amount of refined zinc as Pasminco when the former completes the ramp-up of its Townsville refinery. The Queensland operation will boost Korea Zinc’s total output to about 740,000tpa, while a planned expansion at Sukpo to 178,000tpa will add a further 63,000tpa to its production profile
AME says other zinc producers are clearly optimistic about ongoing zinc demand growth with companies such as Outokumpu, Grupo Mexico, Industrias Penoles and Marubeni signalling their intention to bring on more production capacity.
Although it is encouraging to see such optimism from end producers, miners are unlikely to be dealt any favours this year with higher treatment charges likely to eat up much of the gains made by metal price improvements.
Between 1995 and 1998, AME estimates that average zinc cash costs have fluctuated between US32.2-40.6c/lb and average lead costs between US20-28.1c/lb. Metal prices have been the dominant influence on those average costs because of their impact on concentrate treatment charges and the amount of by-product credits.
AME has put the average cash costs of zinc and lead production for 1999 at a low US33.7c/lb and US18.4c/lb respectively and predicts the average zinc cash cost in 2000 will rise to US35.2c/lb (lead’s rise will be of a similar percentage) due to the higher treatment charges. It won’t be until 2004 that real zinc costs in mid-1999 terms are tipped to fall as a result of increased by-product credits and mine closures.
