Zinc

Zinc is utilized as a protective coating for other metals, such as iron and steel, in a process known as galvanizing. Zinc finds use as an alloy with copper to make brass and also as an alloy with aluminum and magnesium. There are, however, a number of substitutes for zinc in chemicals, electronics, and pigments. For example, with aluminum, steel and plastics can substitute for galvanized sheets. Aluminum alloys can also replace brass.

Zinc futures and options are traded on the London Metals Exchange (LME). The LME zinc futures contract calls for the delivery of 25 metric tons of at least 99.995% purity zinc ingots (slabs and plates). The contract trades in terms of US dollars per metric ton. Zinc first started trading on the LME in 1915.

Prices – Zinc prices in 2003 rose to an average 40.36 cents per pound from the 23-year low of 39.64 cents in 2002. Zinc prices were depressed in 2002 due to the weak economy and were able to rally along with the other metals in 2003 due to the weak dollar and stronger economy. Still, the 40.36-cent-price of zinc in 2003 was well below the 51-56 cent area seen in 1998-2000 before the US economic slowdown began in 2000.

Supply – World smelter production of zinc in 2002 fell –4.7% to a 3-year low of 8.910 million metric tons from 9.350 million metric tons in 2001. The world’s largest producer of zinc is Canada with 8.9% of world smelter production in 2002, followed by Japan with 7.5%, and Australia with 6.4%. US smelter production accounted for only 3.3% of world production in 2002. Australia’s production has been rising rapidly in recent years and in 2002, production of 271,500 metric tons was up 75% from just four years earlier. Mexico’s production has also been rising rapidly and 2002 production of 320,000 metric tons was up nearly 50% from three years earlier.

US mine production of recoverable zinc was on track to fall to 745,100 metric tons in 2003, down from 754,600 in 2002, but above the 10-year US production average of 698,000. US production of slab zinc on a primary basis fell to 182,000 metric tons in 2002 from 203,000 in 2001, while secondary production rose to 113,000 metric tons in 2002 from 108,000 in 2001.

Demand – US consumption of slab zinc in 2002 rose slightly to 1.180 million metric tons from the 9-year low of 1.1140 million posted in 2001. US consumption of all classes of zinc in 2003 rose to 1.43 million metric tons from the 9-year low of 1.410 million metric tons in 2001. Consumption of slab zinc by fabricators in the US was on track to rise to 420,300 metric tons in 2003, up 16.7% from 403,600 metric tons in 2002. The 2002 production level was a record low going back to the beginning of the data series in 1979.

The breakdown of consumption by industries for 2002 showed that galvanizers accounted for 53% of slab zinc consumption, 21% by the zinc-base industry, 18% for brass products, and the rest for other miscellaneous industries. The consumption breakdown by grades showed that 59% was special high grade, 23% prime western, 12% high grade, and 6% re-melt and other. Within that grade breakdown, high grade has been rising while prime Western consumption has fallen by nearly half in the past 3 years.

Trade – The US relies on imports for 60% of its consumption of zinc, up sharply from the 35% average seen in the 1990s. US imports for consumption of slab zinc rose to 874,000 metric tons in 2002 from 813,000 metric tons in 2001, while imports of zinc ore rose to 122,000 metric tons from 84,000 metric tons in 2001. The dollar value of US zinc imports in 2002 fell to an 8-year low of million from million in 2001.

The breakdown of imports in 2002 versus 2001 shows gains in the imports of (1) ore, (2) blocks, pigs and slabs, (3) dross, ashes and fume, and (4) dust, powder and flakes. Declines were seen in the imports of (1) sheets, plates, and other, and (2) waste/scrap. Regarding zinc exports, US exports of zinc ore and concentrates rose to 822,000 metric tons in 2002 from 696,000 metric tons in 2001. US waste/scrap exports in 2002 rose to 47,700 from 44,000 metric tons, and zinc dust (blue powder) exports rose to 5,600 from 4,690 metric tons.