Chinese growth to drive global zinc industry

Reuters reported that China's emergence as one of the world's leading economic powerhouses and premiere driver of global zinc demand will set the industry standard for years to come and dictate where future market balances will lie.

Mr Christopher Parker of Brook Hunt, a research and consulting firm for the mining and metals industry, during a panel discussion on China at the 2010 International Zinc Conference said that "Like it or not, China has truly become the most major force in the world of zinc. Economic liberalization in China has now been under way for about three decades. China today has the outward appearance of a capitalist system, but it is not. It is a market economy within a Communist political system.”

China has been the main driver of the world's zinc consumption for the last 2 decades, securing a compound annual growth rate of 12% per year. In 2009, imports of the metal, used primarily as a galvanizing agent to protect steel against corrosion, jumped a staggering 265% from 2008 levels.

Mr Parker said that government spending from China's USD 585 billion stimulus packages played an important role in 2009's import demand boom. Infrastructure investment grew 44% above 2008 levels, with railway investment up 67% road investment up 40% and 60% jump in public urban transport systems.

He said that the development of China and its zinc demand was characterized by exceedingly high levels of fixed asset investment, fueling the rapid expansion of manufacturing capacity to supply the country's export market.

According to the International Monetary Fund, China's focus on exports and the development of capacity and infrastructure associated with those exports has resulted in a sector accounting for 60 percent of the country's GDP growth over a period from 2001 to 2008. But that reliance on exports opened China up to the impact of 2009's financial crisis and recession in the United States.

Mr Parker said that while the recovery outside of China now is still fragile and liable to set backs, we forecast Chinese zinc demand growth this year and next year will be relatively modest at 9% to 10% per annum. Near term, Chinese authorities will continue to look to the export markets as the major driver of economic growth, which of course will have an impact on zinc consumption.

(Sourced from Reuters)