Fitch revises upwards its zinc price forecast
Fitch had initially forecast the zinc price at $2,100/t, but has revised it upwards to $2,200/t. The agency has explained that this is due to the rapid recovery of Chinese steel production, which will lead to growth in zinc consumption for the rest of this year and into 2021.
Zinc prices are currently at a high for 2020, at $2.483/t. The metal has rallied strongly in recent months, after falling by an average of over 17% in the first three months of the year.
Despite the more optimistic short-term forecast, Fitch expects the price of zinc to drop steadily in the coming years, eventually reaching $2,000/t in 2024. The agency commented: “We forecast that, after a rebound in 2021, annual steel production growth will steadily slow down in the coming years due to declining capacity increases in China and Europe.
“In China, escalating environmental restrictions on producers and weakening demand growth from the construction sector will cap steel production growth rates, while European producers will cut production in the face of low steel prices.”
Fitch Solutions forecasts that China’s real gross domestic growth will be 2.2% this year, provided that there is no second wave of Covid-19 that results in further lockdown measures.
Lynas revenue jumps 21% as rare earth prices jump
Australian miner Lynas Rare Earths posted a 20.6% rise in revenue in the March quarter as selling prices for the key metals it mines hit record highs amid strong demand, particularly for neodymium and praseodymium (NdPr).
NdPr is used in magnets for electric vehicles and windfarms, in consumer goods like smartphones, and in military equipment such as jet engines and missile guidance systems.
The company said it plans to maintain production at 75% however, as it seeks to continue to meet covid-19 safety protocols and grapples with shipping difficulties. Shares in Lynas fell 6.1% after the results.
“They have faced a few logistics issues, and it would be good to know when they are going to start lifting their utilisation rates a bit,” said portfolio manager Andy Forster of Argo Investments in Sydney.
“Pricing has been pretty strong although it may have peeled back a bit recently. I still think the medium, long-term outlook is pretty good for their suite of products.”
Lynas post ed revenue of A$110mn ($85.37mn) for the three months to the end of March, up from A$91.2mn a year earlier as prices soared.
It said its full product range garnered average selling prices of A$35.5/kg during the March quarter, up from $23.7 in the first half of the financial year. “While the persistence of the covid crisis, especially in Europe, calls for careful forecasts for our business ahead, we see the rare earth market recovering very quickly,” said Lynas, the world’s largest rare earths producer outside China.
Freight demand has spiked during the pandemic, while the blockage of the Suez Canal in March delayed a shipment to April.
Lynas’ output of 4,463 tonnes of rare earth oxide (REO) during the quarter was marginally lower than 4,465 tonnes from a year earlier.