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Zinc price forecast: Loosening of China’s zero-Covid policy boosts prices

By  Yoke Wong

Edited by Vanessa Kintu


Zinc ingots isolated on white background
Zinc is an industrial base metal and the fourth most used metal. – Photo: Bjoern Wylezich / Shutterstock

Market optimism on improving demand following China’s reopening amid global supply constraints has boosted zinc prices over the past month. China is the world's largest zinc producer and consumer. The country’s zero-Covid policy over the past three years has significantly reduced industrial activity and zinc demand.

Following Chinese citizens’ mass demonstration against the country’s harsh Covid policies in the past few weeks, the government has eased its lockdown and quarantine measures.

On 7 December, the Chinese State Council announced a series of new measures for the prevention and control of Covid-19. 

Under the new policy, China has stopped mass testing and allowed home quarantine. The government has deactivated the state-run national Covid tracking app on 12 December, which is expected to greatly reduce domestic travel restrictions.

The easing of China’s zero-Covid policy is expected to spur the country’s economic activity and boost zinc demand. The three-month zinc contract traded on the London Metal Exchange (LME) rose to $3,265 a metric tonne on 13 December, up 6.8% from a month ago.

Zinc prices have been rising since early November, when China first indicated that it would ease its strict Covid policy. Market hopes of improving demand amid reduced production in Europe due to high energy costs have boosted the zinc market over the past two months.

Zinc price overview

The zinc market has been volatile over the past year, with the LME price hitting a new all-time high of $4,896 a tonne on 8 March, surpassing the previous record of $4,580 in 2016. 

The metal prices spiked at the beginning of 2022 as post-Covid demand recovery outstripped supply. However, zinc prices fell in the second and third quarter as China imposed a mass lockdown across the country to control the spread of Covid-19, causing Chinese economic growth to decline sharply.

The LME three-month zinc contract fell to a near two-year low at $2,680 a tonne on 3 November, before climbing above $3,000 in the following sessions.

Zinc 5-year price chart

Are you interested to learn more about the zinc market and analysts’ zinc price predictions? Read this article for the recent market development and analysts’ outlook and zinc price forecast.

What is zinc?

Zinc global uses, 2020

Zinc is an industrial base metal. It’s the fourth most used metal, according to the industry body International Zinc Association (IZA). According to IZA, zinc “makes an excellent coating for protecting steel from corrosion” and “is indispensable in a vast range of consumer and industrial products”. 

Furthermore, 60% of the global zinc supply is utilised in the steel industry’s continuous hot-dip galvanising process. Galvanised steel products are widely used in the construction and automobile sectors.

Mined zinc ore requires processing into concentrates before it can be refined into metal through smelting.

Global demand and supply falls in 2022

According to the International Lead and Zinc Study Group’s (ILZSG) data published on 14 December, global consumption of zinc exceeded production in the first 10 months this year.

In January to October 2022, global refined zinc metal production reached 11.125 million tonnes, while the metal’s usage was at 11.242 million tonnes. This led to a market deficit of 117,000 tonnes over the period.

Earlier in October, the ILZSG forecast world demand for refined zinc metal to fall by 1.9% to 13.79 million tonnes in 2022.

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Demand in China was expected to decrease by 2.2% year-on-year (YOY), “primarily driven by decreased activity in most major zinc consuming sectors as a consequence of policies aimed at controlling a resurgence in Covid-19 cases,” said ILZSG.

Consumption in Europe was predicted to fall by 3.1% in 2022, while demand in India, Mexico, Saudi Arabia, South Africa, Taiwan and the US was expected to rise.

Global refined zinc production in 2022 is forecast to fall by 2.7% to 13.49 million tonnes “primarily as a result of a substantial fall in European output”.

Zinc metal production is energy-intensive and the surging natural gas prices in Europe have rendered production to be uneconomical and led many smelters to curtail operations.

Nyrstars, one of the world’s largest zinc producers, has temporarily shut down its Auby smelter in France since October. The producer said on 6 December that “given the ongoing challenging market conditions, the plant will now be placed on care and maintenance until further notice.”

Although Nyrtars’ Budel plant in the Netherlands resumed “production on a limited basis in November, the continued operation of some or all of the site in the weeks ahead will be dependent upon market conditions, which remain extremely challenging,” the producer said on 11 November.

World supply, demand to recover in 2023

Following the decline in 2022, the ILZSG forecast global refined zinc production to increase by 2.6% to 13.84 million tonnes in 2023.

Zinc production in China is expected to grow by 3.8% in 2023 following the easing Covid restrictions. Rising output is also forecast in Australia, India, Kazakhstan, Mexico and Turkey, where a new smelter has recently been commissioned. 

World demand for zinc is expected to rise by 1.5% YOY to 13.99 million tonnes in 2023. Usage in China is expected to grow by 1.2% next year. Consumption is also anticipated to rise in India, Japan, South Korea and Mexico. Demand is projected to be flat in Europe and the US. 

Zinc price forecast

The zinc metal demand outlook among analysts was mixed in the market due to the uncertainty caused by geopolitical instability and the high energy prices.

Despite the supply constraints this year, some analysts were wary of the weak global demand weighing on the overall metal market and maintained a conservative zinc price forecast.

“Despite the curtailing of smelter capacity, zinc prices have continued to fall as demand is weak and the macro environment is dictating price action,” said LME broker Sucden Financials in its fourth quarter metals report.

Although the broker expects supply tightness to continue in the near term, it believes rising output from China and soft global demand will prompt prices to trend lower towards $2,600 a tonne. If there was lower market availability, the metal could reach an upside of $3,000 a tonne.

In contrast, Industrial rating agency Fitch Ratings’ forecast published in September was more bullish. According to Fitch Ratings’ zinc price forecast 2023, the average LME spot metal price was projected at $2,800 a tonne, falling to $2,500 in 2024. The zinc price forecast 2025 could weaken further to $2,200 a tonne.

According to the World Bank’s zinc price forecast, the average price in 2022 was expected at $3,500, falling to $2,800 in 2023 and $2,771 in 2024.

As of 15 December, algorithm-based Trading Economics expected the average zinc prices at $3,153.98 a tonne by the end of this year and $2,908.02 in the next 12 months.

Due to the market volatility caused by war in Ukraine, analysts have refrained from issuing any long-term refined zinc metal price projection. No analyst has issued any zinc price forecast 2030.

Note that analysts’ predictions can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before trading. And never invest or trade money you cannot afford to lose. 


Is zinc a good investment?

Zinc has wide industrial application and is a key metal in galvanised steel. Refined zinc metal prices can be volatile. Whether it’s the right investment for you depends on your investing goals and portfolio composition. You should conduct your own research. And never invest what you cannot afford to lose.

Will zinc prices go up or down?

No-one can say for sure whether zinc prices will go up or down. The zinc price movement will depend on the commodity’s supply and demand. It’s also worth noting that as the US dollar is the main denomination in contracts, the value of the currency also has an impact on prices.

Should I invest in zinc?

Only you can decide if you should invest in zinc and this will depend on your investment goals, risk profile and portfolio composition. Please do your research before making any investment decision and remember that zinc price forecast by analysts could be wrong. 

Remember that past performance is no guarantee of future success. And never invest money you cannot afford to lose.

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