April 2022
The ongoing conflict between Russia and Ukraine has driven zinc prices to record highs which currently show no sign of slowing.

The European zinc spot price reached US$4,225/t on the final day in March and is expected to remain high through the June quarter. The sharp price increase is coming as a result of surging power prices globally but particularly across Europe. The cost of power has already caused multiple closures and production cuts across Europe, impacting the availability of finished zinc.

The AME average Europe zinc price for the March quarter of 2022 was US$3,750/t. The AME average Europe zinc price forecast for the June quarter of 2022 is US$3,850/t. The AME forecast average Europe zinc price for 2022 is anticipated to be around US$3,650/t, with prices anticipated to normalise in the second half of 2022 but remain higher than seen in previous years. This is set to be another annual record high following that of 2021.

Due to the escalating power prices in Europe the March quarter has also seen a widening divergence between the European and Asian zinc prices. The average March prices showed a 5.2% difference deviation with European prices soaring and the Asia zinc price high but remaining more stable. The average AME Asia zinc spot price for the March 2022 quarter was US$3,668/t. The AME Asia zinc price forecast for 2022 is US$3,625/t.

Supply chain logistics are also being impacted due to ongoing Covid-19 mitigation measures, particularly in China where, in an effort to achieve Covid-zero, widespread, frequent lockdowns have resulted in transport being restricted leading to the containment of some smelter outputs leading to concern over supply fulfilment.

Following negotiations, Korea Zinc and Glencore agreed with Teck Resources that the 2022 zinc treatment charge will be set at US$230/t. This marks a 44.7% increase in the 2021 treatment charge. The sharp increase highlights move to surplus in the concentrate market and increasingly short, finished zinc production due to surging energy costs across Europe. Throughout 2022, concentrate availability is expected to increase but ongoing energy issues finished zinc production looks set to continue to decline with the global deficit growing. Escalators have also returned for the first time since 2018. The Teck contracts include a newly reinstated clause that will give plants access to the recent surge in zinc prices. The escalators will kick in when prices are above US$3,800/t, effectively raising treatment charges by 5.0%. The reinstatement of escalators signals the power is shifting back to smelter owners.

LME zinc stocks were down a further 2.7% from the end of February, to 140.0kt at the end of March. European warehouses continue to dwindle to historic lows of 0.50kt at the end of March 2022. LME stocks in Asian warehouses have also continued to drawdown, sitting at 114.1kt.

The AME average Europe lead price for the March 2022 quarter was US$2,333/t. The lead spot price continues to remain stable with AME forecasting the average 2022 European lead spot price to be US$2,271/t.