FACTS & FIQURES — Some optimism for zinc market

Figures published by the International Lead and Zinc Study Group show that between 1979 (the last cyclical peak) and 1992 (the last year for which it has figures), the consumption of zinc in galvanizing applications rose at an average annual rate of 2.3%.

By the end of that period, galvanizing accounted for some 49% of total zinc consumption, compared with 41% at the beginning. This trend is set to continue and will help to underpin the underlying rate of the growth of zinc consumption for the foreseeable future.

Although the construction industry remains the major consumer of galvanized products, most of the growth since the early 1980s has resulted from rising demand from the automobile industry. Capacity constraints actually limited the growth of galvanized sheet consumption by the automobile industry in the mid-1980s, but the considerable number of new coating lines built since then have cleared the bottleneck. The increase in galvanizing capacity worldwide will be needed to meet the growing demand from the construction, automobile and appliance industries.

The two major sectors which employ galvanized materials — the construction and automobile industries — are of course cyclical in nature, and both experienced a marked slowing during the unsynchronized recession of the early 1990s.

As a result of recession in the U.S., zinc consumption in galvanizing weakened considerably in 1990 and again in 1991, only to rebound in the following year when the economy picked up. It is interesting to note, however, that U.S. consumption in galvanizing in 1992 was on a par with its 1989 level (552,000 tonnes) although considerably fewer cars were assembled and construction activity was much lower in the latter year than in the former.

In short, the intensity of the material’s use increased significantly during the period. Since 1992, some 3-4 million tonnes of galvanized sheet capacity has come on-stream in North America. Fortunately, this has coincided with a rebound in U.S. construction activity and increased automobile output. According to the American Iron and Steel Institute, the sheet-and-strip sector rose to 9.7 million tons in 1993 from 8.2 million tons in 1992 and 6.9 million tons in 1991. Meanwhile, electro-galvanized shipments reached a record 3.2 million tonnes in 1992, compared with 2.4 million tonnes a year earlier.

Traditionally, most galvanized steel going to the construction industry has gone toward non-residential buildings, but recently the material has been increasingly used in residential applications. According to U.S. Steel, only about 5,000 tons of hot-dipped steel went into residential construction in 1992. By last year, the figure had risen to 100,000 tons and could be as high as 500,000 tons this year.

Galvanizing capacity has also risen elsewhere. In Japan, for example, total galvanizing capacity now stands at more than 18 million tons per year (tpy), compared with just 8 million tpy in the early 1980s. To a considerable extent, it was the increasing demands of the automobile industry that resulted in the construction of some 20 galvanizing lines between 1980 and 1992.

Japanese zinc consumption in galvanizing peaked at 526,000 tonnes in 1991, and by last year had slumped to 457,000 tonnes. It will be lower still this year, as a result of the ongoing contraction of the construction and automobile sectors. Clearly there is considerable scope for growth when these sectors revive, probably next year.

The same is true of continental Europe, where zinc consumption in galvanizing peaked in 1991-1992. The revival in automobile production is already under way and should improve further in 1995.

Overall, then, we are optimistic about the demand outlook for zinc in 1995 and beyond. If only producers would do more to bring the stock overhang down beforehand.

— From a recent issue of Billiton-Enthoven’s “Metals” publication.