April 2022
There are two process routes for producing finished zinc: electrolytic and smelting. Both require large amounts of energy to produce the finished product. Around 90% of global zinc production is produced via the electrolytic process.

 

The embodied energy in zinc production is, on average, between 49-55GJ/t, this puts the total annual energy required to produce zinc globally between 686-770PJ.

Around 30% of zinc produced is recycled or secondary zinc. The embodied energy to produce recycled zinc is on average 25-40% of primary production at around 13-20GJ/t.

Currently around 14Mt of zinc are produced annually. By 2040 AME estimates the global zinc production to rise 45% to 20.3Mt. To put this into perspective this means around an additional 330PJ of energy will be required to ensure this supply is met.

 

Zinc Production and Power Problems

Due to the amount of power required in zinc production it is particularly susceptible to changes in energy supply and price. Following the global disruption cause by Covid-19 the zinc industry has faced multiple challenges to return to pre-pandemic levels, largely these have been related to the vulnerability of supply to energy costs.

 

European Energy Crisis

Europe, which supplies around 15% of global zinc annually, has been in the grips of an energy crisis since October 2021. The prices for gas, oil and coal have reached unprecedented levels, which has led to widespread production cuts across Europe as companies grapple to balance rising electricity costs with the rising zinc price and demand.

Nyrstar cut production by up to 50% in October 2021 at its three European smelters, Balen in Belgium, Budel in the Netherlands and Auby in France. It further fully cut production at Auby in January 2022 before bringing the smelter back at a reduced rate in March 2022 in light of the record high zinc price.

Similar cuts were seen by Glencore who put the Portovesme smelter in Italy onto care and maintenance in January 2022.

While these price issues began as a result of extremely low gas storage levels and a cold winter, they have now been exbasberated by the Russia-Ukraine conflict which has cause the gas price to dramatically increase due to instability fears over supply.

There is ongoing concern that high prices will be a regular issue in the winter months for the foreseeable future and so producers are increasingly looking into alternative green electricity supply to not only help to meet carbon targets but to safeguard power supply for the future.

 

 

Chinese Production Curtailment

China was also plagued by energy supply issues in 2021 causing a raft of production shutdowns. Companies in Inner Mongolia and Yunnan provinces found themselves told to limit consumption, and subject to rolling blackouts.

These issues came from a combination of problems which compounded including, flooding in key coal producing regions, new green energy policies implemented by the Chinese Communist Party which were unable to meet demand following Covid-19 recovery, severe droughts in the Yunnan province which caused a shortfall in expected hydropower energy. Furthermore, the Chinese ban on Australian coal in the later half of 2021 also led to coal shortages, which helped dent Chinese finished zinc production, which accounts for around 44% of global supply.

 

What the Future Holds

While the future may be uncertain, we can assume that the global appetite for zinc will not subside and with the global push to reach carbon neutrality it will in fact see zinc demand grow. But for this to happen companies will need the additional energy require to meet the demand.

By 2040, AME estimates the global zinc production will increase to 20.3Mt. Requiring additional 330PJ of energy to put the energy consumption of finished zinc at around 1,000-1,100PJ. To fully power the zinc industry by wind power this would require around 16,000–18,000 new wind turbines to be built. For context, Queensland’s biggest wind farm, which is part owned by Ark Energy, a subsidiary of Korea Zinc, and helps power the Townsville Refinery, has 162 wind turbines.

 

 

More companies are realising the importance of energy management and are looking into long-term solutions of self-supplied green energy solutions to end their reliance on grid-connected energy and the implications on price and in some cases reliability that these come with.

Energy is one of the biggest expenses for mining companies, on average totalling approximately 30% of total cash operating costs, therefore the rewards or repercussions of a change in energy cost can be huge. The problem with reliance on green energies however, and as highlighted by the issues in China in 2021, is they do not guarantee for a consistent energy supply.

If there is a lack of the necessary conditions the energy supply will drop impacting any production, and with more extreme weather patterns becoming more commonplace this needs to be addressed before a real switch can be made.

While in the long run battery storage looks set to become more utilised as a solution for power continuity to store additional energy until required, this is not currently utilised on the commercial level needed for all industry.

Hybrid solutions are becoming more commonplace which are likely to be seen in the medium term as operators balance carbon targets with realistic production needs. One of the things companies have in place to help mitigate renewables unreliability presently is renewable Power Purchase Agreements (PPAs). PPAs are contracts to buy renewable energy in agreed volumes and at prices that meet the needs of the generator and the consumer. These are in place to guarantee a supply of energy to operations.

But it seems at least for the foreseeable future the zinc price and supply will be driven by power cost and availability and any issues to these areas could see the current climate replicated.