INTERVIEW: Zinc smelters may need energy support to meet rising global demand: IZA

Government interventions may be needed to ensure a stable supply of zinc as well as critical minor metals like indium and germanium that smelters can extract as byproducts, Andrew Green, President and CEO of the International Zinc Association (IZA), told Platts in an interview.

IZA projects strong growth in zinc demand through 2030, but warns that constrained mine supply and particularly high energy costs in regions most affected by ongoing geopolitical disruptions could undermine the industry's ability to meet that demand.

Assessments of key sectors indicate that by 2030, zinc demand will increase by over 500,000 mt, with India, the country with the fastest-growing middle class, seen as the most prominent growth spot, Green said.

IZA expects the automotive industry's zinc offtake to increase by 22% (140,000 mt) by 2030, driven by currently low galvanization rates in India (22%) and China (60%) compared to the global automotive average of 90%.

"There's a big gap there, and we expect those shares to increase dramatically," Green said, noting that Maruti Suzuki, the Indian subsidiary of the Japanese automaker, has already recognized the need to galvanize car bodies.

Diecasting, a process that forces molten zinc into metal dies to produce complex parts such as locks and door handles used across automotive, hardware and consumer goods, absorbs 1.4 million mt of zinc annually and is projected to require an additional 130,000-140,000 mt over the next five years, according to IZA.

Energy transition metal

Zinc also has a big role in the energy transition: solar generation consumes 2.4 mt of zinc per installed megawatt; a 10 MW offshore wind turbine requires 4 mt, and 1 megawatt-hour of battery energy storage absorbs 2 to 2.5 mt of the metal.

On top of that, IZA expects data centers, which represent a completely new demand source, will need over 40,000 mt of zinc in steel structures, as well as batteries, until 2030.

Up to 60,000 mt of zinc could go into batteries by 2030 and 140,000 mt by 2035, according to a study IZA undertook in collaboration with French consultancy Avicenne Energy.

"Everyone thinks lithium when you talk about batteries, but the reality is that overall demand in that sector is growing so fast that you need all the different chemistries to meet it," Green said. "Zinc currently can't compete with lithium in EV batteries, but for support with grid utilities, data centers and renewables, where energy density is less critical, zinc chemistries work extremely well."

There are about five of these, including zinc-bromine and nickel-zinc, and they offer advantages over lithium-ion batteries.

"You've heard stories about lithium batteries causing fires in cars, data centers and ships. Whenever you put in a lithium system, you have to install fire suppression controls," Green said. "The nice thing about zinc versus lithium is that there is no fire hazard. You can imagine how valuable space is in those data centers. If you can have a battery without all the extra protective and monitoring installations, you have another value there."

The Zinc Battery Initiative that IZA launched five years ago has brought together 25 companies, including Eos Energy Enterprises, which has doubled its zinc-based battery manufacturing capacity to 2 gigawatts. Other companies, such as ZincFive, are developing well.

The Fraunhofer Institute, Europe's leading organization for applied research, expects global zinc consumption to nearly double by 2050. Today, the primary zinc market totals 13 million to 13.5 million mt, with another 3 million mt supplied through recycling, mostly from galvanized steel, as 60% of zinc is used to protect steel from corrosion.

"That may seem like we have a lot of time, but it takes many years to get mines permitted and built," Green said.

Supply-constrained market

He stressed that the zinc market is already supply-constrained. "It's been that way for a number of years, and the forecast from different groups is that the mine supply shortfall could continue for a while," Green said.

"You have mines that are reaching the end of life or have reduced grade availability. There are new mines that were supposed to come online to help balance things, but a few have been delayed or stopped for different reasons," he said.

"Zinc mine supply has failed to hold on to last year's recovery because of structural and environmental disruptions keeping ore scarce," Natalie Scott-Gray, Stone-X's senior metals analyst, told the LME Metals Seminar on Oct. 19.

In turn, treatment charges have hit record lows, as smelters now pay miners to process their concentrate, which is a complete inversion of the traditional market standard. The analyst added that, combined with high energy costs linked to the Iran conflict, the burden makes smelters loss-making. Scott-Gray expects refined zinc production to decline this year, pushing the market into a deficit.

European smelters face the greatest pressure, as concentrate shortages are compounded by some of the highest energy costs globally.

"Europe is the most affected region in the world when it comes to electricity costs: they have changed fundamentally from pre-2020," Matt Hadfield, head of Metals and Minerals Assets at Trafigura, said at the FT Metals Summit on Oct. 15. "Historical European power prices were something in the range of about €50 per megawatt-hour. We're now looking at €200/MWh in the forthcoming months."

In September, Trafigura-owned zinc and lead mining division Nyrstar launched a strategic review of its Budel zinc smelter in the Netherlands, which "says everything you need to know" about the economics of smelters in Europe, Hadfield added.

"Geopolitics has artificially inflated energy prices," Green commented. Were they not so abnormally high, the industry would have no trouble remaining sustainable, but in a situation where these prices are driven up by outside forces, the government should step in to offset the inflation, he said.

"Zinc is recognized as a critical mineral in the US, Canada, Australia and other places. In Europe, it's not," Green said. "I think it falls on the EU to identify zinc as strategic not only for automotive, health, food security, and the energy transition, but also because zinc smelting could unlock critical co-products like germanium, gallium and indium."

Value from by-products

To offset high-energy costs and the inversion that has shifted profit-making heavily from midstream to upstream, zinc producers are already exploring technologies to recover minor metals present as inclusions in zinc concentrate.

"If a company can extract and refine indium, germanium or whatever is present in the feedstock, then that's another area where it can increase value from the same concentrate," Green said.

That's where government prioritization would help a lot and could be mutually beneficial, as it would also give the government access to domestically produced minor metals critical to the green economy and advanced defense and computing technologies.

"For some of the smaller coproducts, the market may not be big enough. With germanium, we might be talking kilograms versus tons, but if you don't have that small amount, you can't produce these next-generation systems that make a night-and-day difference from a defense standpoint. And if the government provides a long-term offtake, that would give companies confidence on those investments," Green said.