In recent years growth in demand for zinc has been led by emerging economies, notably China. Last year usage in Brazil, Russia, India and China rose by 12% to 4.5m tonnes, to account for 40% of global consumption, up from just 22% in 2000.

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In recent years growth in demand for zinc has been led by emerging economies, notably China. Last year usage in Brazil, Russia, India and China (the BRICs) rose by 12% to 4.5m tonnes, to account for 40% of global consumption, up from just 22% in 2000. Global demand grew by just 2.9% in 2007 to 11.3m tonnes, following a 3.6% expansion in 2006.

Demand was weak in the OECD and some parts of Asia in 2007

There was little growth in OECD demand in 2007, and usage fell in a number of countries. According to the International Lead Zinc Study Group (ILZSG), US consumption fell by 8.4% and EU consumption rose by just 1.4%. In Asia (excluding China and India), consumption in Japan fell by 0.8%, in South Korea by 4.3% and in Taiwan by 20%. Clearly, exceptionally strong growth in China and India was at the expense of consumption elsewhere in the region.

These trends appear to be persisting in 2008. ILZSG data suggest that global usage of zinc in the first quarter, at 2.77m tonnes, was 1.6% higher than in 2007. Consumption within the BRICs was 8.4% higher, while offtake elsewhere was down by around 5%.

The growth in Chinese consumption remains strong

Within the BRICs, China is by far the largest zinc consumer, accounting for 32% of global usage. Chinese consumption in the first quarter was up by 9.4% year on year. The latest economic data suggest that industrial production is rising by around 16% per year, while fixed asset investment is running 25% ahead of last year. In response, galvanised steel production continues to expand rapidly.

This reflects the buoyant economic environment, and the significant investment in new galvanising capacity as steel mills in China move further down the value chain. In 2007 domestic galvanised steel output rose by 30% to 18m tonnes. In the first four months of this year production was around 20% higher in year-on-year terms. Demand for zinc within China has benefited from rapid growth in transport and investment in infrastructure and non-residential construction. Production of motor vehicles, washing machines, refrigerators and airconditioners have all registered year-on-year gains of over 15% to April, while production in the shipping sector was 60% higher. We forecast a 9.3% increase in Chinese refined zinc consumption in 2008, followed by further growth of 9.6% in 2009 and 8.7% in 2010.

Zinc demand will suffer from the downturn in the global vehicle industry

In Brazil, Russia and India usage in the first four months of 2008 was almost 5% higher than in 2007. In the rest of the world, usage was almost 5% lower than in 2007, owing to the credit crunch associated with the US sub-prime mortgage crisis, which has hit the zinc market primarily through its impact on the automotive sector.

US automotive sales in May fell to a seasonally adjusted annualised rate of 14.3m units, the lowest level in ten years. A similar but less extreme correction occurred in the EU and Japan, where car registrations to May were down by an estimated 0.7% and 0.1% respectively.

Demand is expected to rise in 2009

Global consumption of zinc rose by 1.8% in the first four months of 2008, mainly in China. The Economist Intelligence Unit expects demand among emerging economies to remain strong in the second half of 2008, offset by weak demand in OECD countries, giving an increase in global consumption of almost 3% in 2008. In 2009 the US and European economies will start to recover (zinc is less exposed to the residential property market than some other base metals, such as aluminium and copper). Coupled with continuing growth among BRIC and developing economies generally, growth in global usage will accelerate to more than 4% in 2009, and to more than 5% in 2010 as galvanised steel production increases sharply among emerging economies.

Refined zinc: consumption
(＇000 tonnes unless otherwise indicated)
2006 2007 2008 2009 2010
China 3,156 3,588 3,925 4,300 4,695
EU27 2,438 2,471 2,450 2,470 2,525
US 1,136 1,041 975 985 1,010
Japan 594 588 575 578 585
Brazil 430 460 490 520 580
South Korea 534 511 510 515 535
Taiwan 238 249 265 280 290
India 282 226 235 240 245
Others 2,191 2,185 2,225 2,255 2,300
World total 10,999 11,319 11,650 12,143 12,765
% change 3.6 2.9 2.9 4.2 5.1
Sources: International Lead and Zinc Study Group (ILZSG); Economist Intelligence Unit.