The metals market took divergent paths in 2024: zinc faced a supply crunch, driving prices higher, while lead grappled with an inventory surplus, weighing on its value.
The metals market exhibited diverging trends for zinc and lead in 2024.
In the fourth quarter, the price of zinc surged above $3,284 per tonne, driven by an acute raw material shortage, while lead faced downward pressure due to excess inventories, reaching record highs.
The price gap between the two metals exceeded $1,000 per tonne, the widest since February 2023.
However, by early 2025, the premium of zinc over lead narrowed to $888.50 per tonne due to a decline in zinc prices.
The sharp increase in zinc prices was supported by a combination of factors, including supply disruptions and production declines. Global zinc mine production fell for the third consecutive year in 2024. The fire at the Century mine in Australia, operated by Sibanye Stillwater, further exacerbated the crisis, reducing available stocks.
According to the London Metal Exchange (LME), zinc stocks, after peaking at 367,000 tonnes in August, declined to 324,000 tonnes by the end of November 2024. In China, refined zinc production also fell 7% year-on-year, with major producers forced to lower processing rates to maintain profit margins.
Unlike zinc, the lead market experienced a significant increase in inventories. The LME’s total inventory, including both on-warrant and off-warrant stocks, grew from 29,000 tonnes at the start of 2023 to 305,000 tonnes in November 2024. This surge was primarily driven by Chinese imports of the metal, a rare occurrence since 2019, and increased exports from India, whose metal now accounts for 52% of LME’s registered stocks.
Although the International Lead and Zinc Study Group (ILZSG) indicates that the lead market was close to balance in the first 11 months of 2024, secondary production – which is often difficult to track – appears to have played a key role in the inventory buildup.
The rising inventories have prompted hedge funds to bet on further price declines, pushing net positions to record levels on the LME lead contract.
While funds remain long on zinc, the market is shifting. According to the ILZSG, zinc mine production is expected to recover in 2025 as new mines come online and idle plants restart. Although global mine production was 370,000 tonnes lower in the first 11 months of 2024, data suggests a rebound in the fourth quarter.
Increased concentrate supplies will improve the outlook for smelter production, narrowing the premium of zinc over lead. However, a rise in zinc mine production also implies an increase in lead supply, heightening the risk of further inventory accumulation and price pressure.
The demand outlook remains uncertain for both metals. Lead is primarily used in automotive batteries, but the shift to electric vehicles is reducing demand for lead-acid batteries. On the other hand, approximately half of zinc consumption is tied to the construction sector, which is struggling in many key economies, particularly China.
According to the ILZSG, global zinc consumption increased by only 0.7% in 2024, while lead demand declined by 1.3%. In the absence of strong demand-side stimulus, supply dynamics will continue to drive price movements.
Original article published on Money.it Italy 2025-02-06 06:40:00. Original title: Zinco e piombo, cosa sta accadendo nella produzione mineraria?
