The supply squeeze is also trickling down to junior zinc explorers. When zinc prices were low, exploration dried up, meaning there’s not enough supply to match the growing demand for zinc especially for galvanized steel, Jeff Hussey, president and CEO of Osisko Metals, recently told Kitco News:
“The world needs more zinc mines but we don’t have them because there has been no exploration. If you had all the expected development projects come on line at full capacity, analysts expect that demand will still outstrip supply by mid-2020,” he said. “This means there is a limited risks of further downside in the price long term.”
Consider that two of the largest new zinc mines will not produce enough ore to make up for all of the recent closures and output cuts. While New Century is restarting its zinc mine that closed in 2016 - at the time the world’s third largest - “it will take time for Century to ramp up and longer still for that flow of raw material to make a significant impact on the refined metal section of the supply chain,” according to Reuters metals columnist Andy Home, who believes the zinc market has entered a period of peak tightness.
Australia’s Dugald River mine, opened in 2017, and Vedanta Zinc’s Gamberg mine in South Africa, commissioned last July - can between them only produce a combined 420,000 tonnes of zinc concentrate, less than 3% of global demand.
Wood Mackenzie states that zinc mine closures, attrition and demand growth will require 2.2 million tonnes of new mine capacity a year.
CZL Price at posting:
2.0¢ Sentiment: None Disclosure: Held
