Zinc: persistent backwardation strengthens prices

During the first quarter of 2019,the Zinc prices moved upward and reached 2.964 $/tonne, the same level of 25th July of 2018 (marking a recovery of 16%), while during 2018 the prices dropped from 3.300 $/tonne down to 2.557 $/tonne (-30%).

The persistent backwardation on LME (settlement prices higher than three months) witness a tension in the market due to a deficit of 95.000 tonnes and stock fallen down to 93.450 tonnes on February.

The jump in prices would have been stronger without the drop of consumption in China due to both the lunar year and the slowdown of domestic demand (some galvanizers and zinc smelters are still affected by stringent new environmental regulations).

Looking at the future, Zinc, together with Copper, in China will benefit from the new government investments in infrastructures (+4,6%) and urbanization that will encourage the Chinese smelters to rump-up their capacities.

All these measures would take a few months ahead, before the prices will step down and then stabilize during the second half of 2019.

We don’t agree with some experts that the high present level of zinc prices will encourage substitution, because the Zinc is insuperable defender of steel against rust.

It goes without saying that in the world more than 50 million tonnes of steel are destroyed by the rust every year; this enormous waste of resources would be avoided if the steel structures are protected with Zinc (thermal spray or hot dip galvanization).