Base Metal Supply Disruption: Why Zinc, Lead, and Copper Are Facing Tightness
The base metals industry is currently facing a supply disruption crisis with zinc, lead, and copper all experiencing tightness in raw material supply. Fastmarkets’ latest data reveals the severity of the situation, with copper concentrates TC index at a significant discount, zinc spot concentrate TC cif China fluctuating, and lead spot concentrate TC cif China also showing instability.
Industry experts have identified shared factors affecting all three metals, leading to an acute raw material tightness. One key issue is the imbalance between raw material supply growth and demand, with mining investments being underfunded for years. This lack of capital for new mines is exacerbated by stringent social, economic, and environmental requirements, making it difficult for projects to get off the ground.
Latin America, a region with significant reserves for these base metals, has also been hit by issues such as strikes, local opposition, and permitting challenges. The closure of First Quantum’s Cobre Panama mine due to environmental issues has had a cascading effect on copper concentrate TCs. Lead, copper, and zinc mining in the region have all been impacted, contributing to the tightness in concentrate markets.
Moreover, the industry is facing an increase in smelter capacity, particularly in China, which has led to overcapacity in the region. New traders entering the market, particularly those with a background in energy trading, are also impacting TCs. The willingness of traders to push into the market and not immediately make a profit, as well as the high prices of precious metals contained in zinc, lead, and copper concentrates, are further complicating the situation.
Overall, the base metals industry is grappling with a complex set of challenges that are causing disruption in the supply chain. Understanding these factors is crucial for companies and traders looking to navigate the current market conditions and make informed decisions about their base metals strategy.
