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A Stronger Dollar and Recession Fears Will Cause Another 8-12 Percent Drop in Zinc Prices During the Fourth Quarter Of 2022

Zinc futures traded less than USD 3000 per tonne, way behind the two-month high of USD 3,686 per tonne on August 11, same as other metals, during a substantial dollar value along with looming fears of a recession causing a decline in metal demand.

In August, China, a top consumer, imported 3,100 mt of refined zinc, less than 17.09 percent during the month and 58.88 percent in the year. However, the worries about Europe's supply constraints continue while there is hesitation about energy shortages before the approaching winter.

There have been production cuts by European Smelters as the increasing energy prices aggravated amid the Ukraine war making it unprofitable. Eurometaux, the European metals trade association, stated that half of the EU's zinc and aluminium production capacity has already been pushed offline caused by the power crisis.

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Trading Economics global macro models and analysts estimated that Zinc will be trading at USD 2929.26/MT by the quarter end. While it is anticipated that it will trade at USD 2702.38/MT within twelve months.

As per Icra, Indian Metal Prices Will Remain Under Pressure in the Near Future

According to Icra, it is anticipated that in the domestic market, the demand for non-ferrous metals will grow at a rate of 5-6 percent in the Forecast Year 2023 as a result of the government's efforts to push infrastructure development along with the rise of real estate industry.

Icra, the rating agency, predicted that the primary non-ferrous metal industry is set to witness a rough ride due to a challenging operating environment after major price corrections for metal and increased costs of coal in the year.

The estimated profits will undergo crosswinds during the first half of 2023, with a period of relaxation in the second half.

The agency also predicts that the international base metal prices have witnessed a drop of 25-40 percent in 2023 in comparison with the March 2022 record high. While the costs of metal have been facing pressure since May end of 2022, a significant correction took place in the second quarter of 2023 and the prices consecutively revamped by another 18-20 percent.

Senior Vice-President and Group Head, Corporate Sector Ratings at Icra, Jayanta Roy, stated that the metal balance would continue to be in deficit due to Europe's zinc and aluminium production cut in the middle of high energy prices in the region. Copper supply also suffered a significant hit during the second quarter of 2022 caused by ongoing protests in the Peru mines.

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It is predicted that the prices for metals will continue to stay the same in the coming quarters. As the deficit situation provides aid to the metal prices, increasing fears of weak global demand are likely to restrain the upward slope in the upcoming term.

As per Procurement Resource, as the dollar value increases along with an expected recession, fear the demand for metals is declining, which has led to a drop in zinc prices. However, in India, the non-ferrous metal prices are likely to grow due to factors like the government's efforts to develop infrastructure and the booming real estate sector.

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