LONDON: China returned to being a major net importer of refined zinc last year after a brief inversion of historical trade flows in 2022. A combination of Western smelter closures and snarled shipping logistics that year led to record-high physical premiums, with Chinese exports serving to rebalance the global market.
The smelter problems haven’t gone away. Indeed, Nyrstar announced last month it was fully idling its Budel plant in the Netherlands. But Western demand for zinc is lacklustre, particularly from the key construction sector, and China is once again soaking up Western surplus.
China’s lead trade also inverted in 2022 for very similar reasons, but there has been no return to past trading patterns. Exports rose further in 2023 and there is no sign that they are going to stop any time soon.
ZINC BUSINESS AS USUAL
China’s exports of refined zinc surged from 5,000 metric tons in 2021 to 81,000 in 2022 as metal gravitated to the West on a combination of higher physical premiums and persistent tightness on the London Metal Exchange (LME).
Outbound shipments fell back to just 9,000 tons in 2023 as Western markets loosened. LME stocks rebuilt from a marginal 27,750 tons in January to 223,225 tons at the close of December. The benchmark LME cash-to-three-months spread reverted to contango, having seen the cash premium spike as high as $218 per ton in June 2022. China’s zinc imports began accelerating around the middle of last year, and the full-year tally of 380,000 tons was almost five times higher than the previous year’s count.
The country flipped back from being a rare net exporter in 2022 to net importer to the tune of 371,000 tons in 2023. There’s no reason to believe that trade patterns will change much in the immediate future.
The Western market shows every sign of being in significant oversupply.
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