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.
Global iron ore production to recover by 5.1% in 2021
Global iron ore production fell by 3% to 2.2bnt in 2020. Global production is expected to grow at a compound annual growth rate (CAGR) of 3.7% to 2,663.4Mt between 2021 to 2025. The key contributors to this grow will be Brazil (6.2%), South Africa (4.1%), Australia (3.2%) and India (2.9%). Key upcoming projects expected to commence operations include South Flank in Australia (2021), Zulti in South Africa (H2 2021), Serrote Da Laje in Brazil (H2 2021) and Gudai-Darri (2022), according to GlobalData, a leading data and analytics company.
Vinneth Bajaj, Associate Project Manager at GlobalData, comments: “Declines from Brazil and India were major contributors to the reduced output in 2020. Combined production from these two countries fell from a collective 638.2Mt in 2019 to an estimated 591.1Mt in 2020. The reduced output from the iron ore giant, Vale, was the key factor behind Brazil’s reduced output, while delays in the auctioning of mines in Odisha affected India’s output in 2020.
“Miners in Australia were relatively unaffected by COVID-19 due to effective measures adopted by the Australian Government, while a speedy recovery in China led to a significant 10.4% increase in the country’s iron ore output.”
Looking ahead, the global iron ore production is expected to increase by 111.3Mt to 2,302.5Mt in 2021. Rio Tinto is expected to produce up to 340Mt of iron ore, while BHP has released production guidance of 245–255Mt, supported by the start of the Samarco project in December, which is expected to produce between 1–2Mt.The company has retained its guidance for Australian mines at 276–286Mt on a 100% basis, due to scheduled maintenance work at its ore handling plant and tie-in activity at the Area C mine and South-Flank mine.
Bajaj added: “The remaining companies are expected to produce more than 600Mt of iron ore, including FMG, whose production is expected to range between 175–180Mt supported by its Eliwana mine that commenced operations in late December 2020, and Anglo American, which is expecting to produce between 64–67Mt. Vale is expected to resume 40Mt of its production capacity, taking its overall production capacity to 350Mt in 2021, with production guidance of 315-335Mt.”