Chinese industrial slowdown drives down zinc prices

25 March 2020 (Last Updated March 25th, 2020 14:05)

Within the base metals, zinc prices reacted most sharply to the news of the spread of the coronavirus. Prices fell by 22.9% from US$2,466/t on 22 January to US$1,880/t on 20 March. Any price rises during this period could not be sustained due to concerns of diminishing demand from the galvanized steel sector.

Chinese industrial slowdown drives down zinc prices

Within the base metals, zinc prices reacted most sharply to the news of the spread of the coronavirus. Prices fell by 22.9% from US$2,466/t on 22 January to US$1,880/t on 20 March. Any price rises during this period could not be sustained due to concerns of diminishing demand from the galvanized steel sector.

Given it accounts for more than 50% of zinc consumption, the fall in demand from the construction sector is having a significant impact on zinc prices. Chinese fixed asset investments across both January and February in construction plunged by 82.4%. Furthermore, fears of the zinc market moving into a surplus after a four years of deficit and rising inventory levels at the Shanghai Exchange could further accelerate a decline in the zinc price.

Looking ahead, with fears of diminishing demand and rising inventories, the zinc price is expected to trend towards the lower level of US$1,610/t over the coming months.