Market Analysis – 11191609 – Zinc scrap

Executive Summary

The global zinc scrap market, a critical component of the circular economy, is valued at est. $14.8 billion and is projected to grow steadily, driven by demand from the galvanizing and die-casting sectors. The market exhibits a compound annual growth rate (CAGR) of est. 4.2%, reflecting a broader industrial push towards sustainable materials and cost-effective production. The single most significant factor influencing this commodity is extreme price volatility, directly linked to the London Metal Exchange (LME) and fluctuating energy costs, which presents both a primary risk and a strategic sourcing opportunity.

Market Size & Growth

The global Total Addressable Market (TAM) for zinc scrap is estimated at $14.8 billion for 2024. The market is forecast to expand at a CAGR of est. 4.2% over the next five years, driven by robust demand for recycled metals in construction and automotive manufacturing, coupled with regulatory tailwinds favouring circular economy models. The three largest geographic markets are 1. China, 2. European Union (led by Germany), and 3. United States.

Key Drivers & Constraints

1. Demand from Galvanizing: The construction and automotive industries are the largest consumers of galvanized steel, which uses zinc as a protective coating. Global infrastructure spending and vehicle production are primary demand signals for zinc, and by extension, zinc scrap.
2. Primary Production Costs: High energy prices and stringent environmental regulations on mining and primary smelting make secondary (recycled) zinc a more cost-effective and ESG-friendly alternative, boosting scrap demand.
3. LME Price Volatility: Zinc scrap prices are directly indexed to the LME zinc price, which is subject to high volatility from macroeconomic factors, energy costs, and shifts in global supply/demand. This creates significant budget uncertainty.
4. Scrap Quality & Collection Rates: The efficiency of scrap collection networks and the quality (i.e., purity, form) of available material directly constrain supply. Contamination increases processing costs and lowers the value of the recovered metal.
5. Sorting Technology: Advances in automated sorting, such as X-Ray Fluorescence (XRF) and Laser-Induced Breakdown Spectroscopy (LIBS), are enabling higher recovery rates and the production of purer recycled zinc, making it a more viable substitute for primary metal.
6. Trade & Tariffs: As a globally traded commodity, zinc scrap flows are sensitive to import/export tariffs and trade policies, particularly those involving major players like China, the EU, and the US.

Competitive Landscape

Barriers to entry are high, driven by significant capital intensity for processing facilities (smelters, refineries), extensive logistical networks, and stringent environmental permitting requirements.

⮕ Tier 1 Leaders * Glencore: A dominant, vertically integrated producer and trader with massive scale in both primary and secondary metals, offering global sourcing and hedging capabilities. * Nyrstar: One of the world's largest zinc producers, with a strategic focus on increasing the use of recycled feed in its European smelters. * Korea Zinc Co., Ltd.: A global leader in non-ferrous metal smelting, with advanced refining technology that can process a wide range of complex secondary materials. * Boliden AB: Major European smelter with a strong focus on sustainability and a high-grade metals portfolio, including recycled zinc.

⮕ Emerging/Niche Players * Horsehead Holding (Zochem): Key player in North America for zinc oxide and recycled zinc products. * Recylex S.A.: A European specialist in lead and zinc recycling, with a focus on processing industrial waste and end-of-life products. * Aqua Metals: Innovating with a proprietary "AquaRefining" hydrometallurgical process, promising a cleaner, less energy-intensive method for recycling. * Regional Aggregators: Numerous local and regional scrap yards that serve as the primary collection point before selling to larger processors.

Pricing Mechanics

Zinc scrap pricing is predominantly based on a discount to the official LME cash price for Special High Grade (SHG) Zinc. This discount, or "spread," is determined by several factors: the grade and form of the scrap (e.g., dross, die-cast, shavings), its zinc content, the level of impurities (e.g., aluminum, lead, iron), packaging, and freight costs. The final transaction price is typically a formula: (LME Price - Discount) x Payable Zinc Content.

Suppliers and buyers negotiate the discount based on local supply-demand dynamics and processing costs. Higher-purity, cleaner scrap commands a smaller discount, as it requires less energy and processing to be returned to a usable form. The most volatile cost elements directly impacting the final price are the underlying metal price and the energy required for smelting.

• LME Zinc Price: Swings of +/- 25% have been common over the last 24 months due to inventory levels and macroeconomic sentiment. [Source - London Metal Exchange, 2024]
• Industrial Energy Costs (Natural Gas/Electricity): Have seen regional spikes of over 50%, directly impacting smelter processing fees. [Source - U.S. Energy Information Administration, 2023]
• Ocean & Inland Freight: Container and trucking rates have fluctuated by 20-40% post-pandemic, impacting the landed cost of scrap.

Recent Trends & Innovation

• Increased Focus on "Green Zinc": End-users, particularly in the automotive and construction sectors, are increasingly demanding products with certified recycled content to meet ESG targets. This is creating a premium for traceable, high-purity scrap. (Ongoing, 2023-2024)
• Consolidation in Recycling: Major metal producers continue to acquire recycling assets to vertically integrate and secure scrap supply. Nyrstar announced significant investment to expand its recycled zinc processing capacity at its Auby facility in France. [Source - Nyrstar, Q2 2023]
• Adoption of Advanced Sorting: Major recyclers are investing heavily in sensor-based sorting technologies (XRF, LIBS) to more effectively separate zinc from mixed metal streams, boosting yields and creating higher-value furnace-ready products. (Ongoing, 2022-2024)

Supplier Landscape

Regional Focus: North Carolina (USA)

North Carolina presents a stable demand outlook for zinc scrap, driven by its significant manufacturing base in automotive components, industrial machinery, and building materials. While the state lacks primary zinc smelters, it hosts a robust network of scrap aggregators, processors, and foundries that consume zinc die-cast and galvanizing scrap. Proximity to major automotive and manufacturing hubs in the Southeast ensures consistent generation and demand. The state's business-friendly tax environment and well-developed logistics infrastructure, including the Port of Wilmington, facilitate efficient intra-regional and export trade flows. Labor costs are competitive for the region, though all operations are subject to federal EPA regulations governing metal recycling and emissions.

Risk Outlook

Actionable Sourcing Recommendations

1. To mitigate extreme price volatility (High Risk), diversify pricing mechanisms. Structure contracts to price 60% of volume on a 3-month LME average to smooth spot market shocks. For the remaining 40%, negotiate fixed-price forward contracts with 2-3 key suppliers during periods of market weakness to improve budget certainty and lock in favourable rates.
2. To enhance supply quality and support ESG goals, initiate a supplier qualification program focused on technology. Prioritize suppliers who have invested in advanced XRF sorting. Offer a nominal price premium (est. 1-2%) for certified high-purity (>98% Zn) scrap, reducing processing costs and securing material for high-value applications.