Zinc and lead prices are expected to remain elevated for the rest of 2023 due to tightness in mine supply, according to industry analysts.
Dan Smith, head of research at Amalgamated Metal Trading (AMT), stated that zinc prices are likely to stay high as closures and declining output at some mines reduce supply. Additionally, a fall in battery scrap supply has limited secondary lead output.
“Lead and zinc are expected to outperform the rest of the (base metals) complex, as the Chinese market is likely to remain tighter,” Smith said.
Lead prices typically rally during the summer months, and the seasonality chart over the last 14 years shows prices usually hit an annual low in week 20 of the year, then rally through the rest of the year. However, any price upside for lead is limited as 90% of the demand for the metal is from the battery sector, which means it will not benefit as much as other metals from China’s measures to boost construction activities, according to Wood Mackenzie analyst Kevin Clarke.
In the zinc market, Chinese smelters have brought forward maintenance and a few have reportedly cut production due to a lack of feedstock and low margins. Zinc concentrate tightness is expected to last another six to nine months, despite easing slightly in the second half of 2024 compared to January-June, according to Wood Mackenzie analyst Andrew Thomas.
Zinc prices are likely to consolidate around current levels in the next six to eight weeks, then rise to $3,000 or higher by the first quarter of next year when there is expected to be a clearer indication of increased demand. Prices could reach $3,500-$3,600 if financial investors return, Thomas said, but downside risk could bring prices to $2,500.
However, mine supply is expected to recover from the second quarter of 2025, which could put zinc prices under pressure, according to Macquarie’s forecasts.