Zinc price rebound anticipated amid unstable market

New Century Resources processes tailings at Century mine.

Despite current volatility, zinc prices have been forecast to climb in the coming months as COVID-19’s strain on the market eases.

New Century Resources today expressed confidence in the commodity while reporting record company production at the Century zinc mine in Queensland during the June 2020 quarter.

The company, which has declared commercial production at Century, had a 22 per cent increase in zinc metal output to around 34,500 tonnes. It also achieved a 17 per cent decrease in direct costs to approximately US$0.79 ($1.13) per pound of payable metal.

New Century managing director Patrick Walta noted positive conditions emerging for zinc miners, expecting a price rebound due to an increase in building projects across the globe to boost economies following COVID-19.

“From a market perspective, despite the zinc price remaining near four-year lows, a strong decline in spot treatment charges in the quarter has improved conditions for zinc miners,” he said.

“The company also sees potential for a price rebound due to additional metal demand from increased global infrastructure development linked to COVID-19 government stimulus.”

Fitch Solutions forecast that zinc prices “will likely edge higher in the coming months” as the negative shock to global demand from the COVID-19 outbreak wanes.

“As of June 22, three-month LME zinc had already recovered by 14.7 per cent from a March low of $US17,844/tonne and we expect a further rebound in the coming months,” Fitch Solutions said.

However, Fitch lowered its 2020 zinc price forecast last week, down from an expected $US2550 ($3660) per tone to $US2100 per tonne.

According to Fitch Solutions’ zinc report, it is expected that a long-term downtrend in zinc production will remain due to a market surplus.

Zinc production is expected to increase by 2.1 per cent in 2020 with a 0.1 per cent consumption growth decrease.

A total surplus of 71,000 tonnes of zinc is expected for 2020,  compared to a deficit of 189,000 tonnes in 2019.

“Prices will remain on a long-term downtrend as the market surplus that emerges in 2020 persists into the long term,” Fitch stated.

“This structural decline will be driven by sluggish growth in global steel production, as galvanising steel is the primary use of zinc.”

At the Century operation, Walta said New Century continued to ramp up production despite COVID-19 and had again delivered record output in the June quarter.

“Century has now achieved seven consecutive quarters of increasing production and lowering costs, and the company remains focussed on continuing this trend,” he said.

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