Japan’s zinc output will climb in 2012 as smelters run at full capacity to meet recovering demand from the auto and construction industries after the earthquake and tsunami, amid a forecast for a global deficit.
The world’s third-biggest economy is expected to produce 590,000 metric tons of refined metal next year, 8.5 percent more than 2010, said Nobuyuki Nakamoto, general manager at Mitsui Mining & Smelting Co.’s zinc business. Demand may increase 5.5 percent to 540,000 tons in 2012, he said.
A gain in global demand for the metal, used to galvanize steel, may help prices recover from a 14-month low on Sept. 26 and benefit producers such as Korea Zinc Co., Nyrstar (NYR) NV and Teck Resources Ltd. (TCK/B) The metal has declined 20 percent this year. Demand will exceed supply by 106,000 tons in 2012 from a surplus of 178,000 tons in 2011, according to Macquarie Group Ltd.
“Domestic consumption will rise next year for rebuilding and following a full recovery in car output,” Nakamoto said in an interview yesterday. In the three months to December, Japan’s automakers are expected to increase production to make up for losses in April to June following the disaster, he said.
Production by steelmakers has recovered close to the level before the collapse of Lehman Brothers Holdings Inc. pushed the world into recession, Nakamoto said, citing the company’s recent survey in the sector.
Japan was Asia’s third-biggest zinc consumer after China and South Korea in 2010, according to the International Lead & Zinc Study Group. Demand was 516,000 tons last year, 4 percent of the world’s 12.6 million tons.
The metal will average $2,310 a ton in 2011 and $2,425 in 2012, Michael Widmer, head of metals research at Bank of America Merrill Lynch in London, wrote in a report on Sept. 27. Widmer was the second-most accurate forecaster for the metal for the eight consecutive quarters ended March 31, according to Bloomberg data.
Zinc for three-month delivery on the London Metal Exchange climbed 1.7 percent to $1,957 a ton at 4:50 p.m. Tokyo time.
The market will see a deficit next year from a moderate surplus this year with solid demand from the construction sector, recent drops in refined production and declining unreported stockpiles in China, analysts at Macquarie, including Duncan Hobbs in London, wrote in a report on Sept. 26.
Physical market prices signal steady metal premiums at high levels and falling treatment charges for concentrates, Macquarie said. The metal will stay within a range of $2,000 to $2,500 a ton over the next six to 12 months, the bank said.
A recovery in output will reduce the country’s imports of refined metal next year to the lowest level since 2002, while helping boost exports, Nakamoto said. The auto sector in Japan accounts for 50 percent of demand, followed by construction with 30 percent and electronics with 20 percent, he said.
The country’s imports are projected to drop to 25,000 tons in 2012 from an estimated 77,000 tons this year, the highest level since 2000, he said. The country may export 80,000 tons to 90,000 tons in 2012, compared with an estimated 83,000 tons in 2011, he said.
“If current lower prices last longer, some high-cost producers will be forced to cut output or out of business,” Nakamoto said. Production costs of about 40 percent of the smelters in the world are estimated at $1,850 a ton, he said.
Nakamoto projects zinc for immediate delivery may trade in a range between $1,600 and $2,600 a ton over the next 12 months with an average price between $2,200 and $2,300.
Mitsui Mining’s zinc output may increase to 116,000 tons in the six months starting from Oct. 1, up 25 percent from April to September and up 11.5 percent from the same period a year earlier, he said. The company will release its six-month output plan in early October.