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Zinc Stocks Surge as Glencore Cuts Output

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The zinc price also jumped on the news, climbing 12.5 percent. That’s its largest one-day jump in over a decade and a two-month high.

The zinc price jumped Friday after major miner Glencore (LSE:GLEN) said late Thursday that it plans to reduce its annual zinc production by 500,000 tonnes. That’s a third of the company’s output and about 4 percent of global zinc supply. 
According to Reuters, the zinc price increased 12.5 percent on the news, achieving its largest one-day jump in over a decade and hitting a two-month high. From that peak of $1,875 per tonne, it’s since decreased to trade at $1,832, still up 9.8 percent.
By comparison, the zinc price sank to a five-year low of $1,601.50 just last month.
Glencore will also reduce its annual lead output by 100,000 tonnes, and Reuters states that the lead price also saw a big jump Friday. At one point it rose almost 9 percent to hit $1,821.50 per tonne, though it later dropped back to $1,757. Earlier this year, Glencore announced cuts to its copper and coal production as well.

Market reaction

Thus far, the market has reacted positively to the news. Speaking to Reuters, BNP Paribas (EPA:BNP) strategist Stephen Briggs commented, “[t]his (Glencore move) is big, it’s much bigger than the move in copper, it shifts the needle substantially. The rally is not going to all peter out, though having said that the jump today is in large part because of short covering.”
Meanwhile, INTL FCStone (NASDAQ:INTL) analyst Edward Meir said that Glencore’s output reduction “is certainly significant and swings the zinc market into a deficit for 2016.” His firm had previously forecast a 2016 zinc surplus of 180,000 tons, but is now anticipating a 300,000-ton deficit.
Glencore’s share price has also benefited from the news — as of 12:50 p.m. EST Friday, the stock was sitting at GBP1.31, up 8.57 percent.
While that’s definitely a positive move, it also adds to Glencore’s recent share price volatility. The company’s share price dropped precipitously at the end of September after investment firm Investec (LSE:INVP) issued a note questioning Glencore’s value and high debt load, then bounced back after Glencore reassured investors that it remains a viable operation.
Most recently, a Bank of America report said that global financial firms have an estimated $100 billion or more in exposure to Glencore. That, the firm believes, could be problematic, as Glencore’s debt and trade deals have a higher-than-expected level of risk. Zero Hedge has gone so far as to suggest that Glencore is “in danger of becoming the commodity sector ‘Lehman.’”
All in all, Glencore is down 56.89 percent year-to-date.

Zinc stocks surge

Glencore is not the only company whose share price has risen on the back of its announcement. Zinc-focused companies across the board have seen major gains since the news was revealed. Here’s a brief overview of some that have risen. All stats were current as of 11:45 a.m. EST.

  • Trevali Mining (TSX:TV) — up 46.99 percent, at $0.61. A total of 6.51 million shares of the company have traded hands this morning compared to the average of 1.02 million.
  • InZinc Mining (TSXV:IZN) — up 36.36 percent, at $0.075. In all, 112,950 shares have moved vs. the average of 61,238.
  • Canadian Zinc (TSX:CZN) — up 33.33 percent, at $0.10. The company has seen 1.22 million shares trade as opposed to the average of 408,294.
  • Zazu Metals (TSX:ZAZ) — up 17.86 percent, at $0.165. It’s seen 142,000 shares trade hands compared to its average of 12,517.
  • Vedanta Resources (LSE:VED) — up 11.74 percent, at GBP5.92. An impressive 2.48 million shares of the company have traded, well up from the average of 770,431.
  • Nyrstar (EBR:NYR) — up 10.51 percent, at 2.59 euros. A total of 4.57 million shares have traded as opposed to the average of 1.65 million.
  • Nevada Zinc (TSXV:NZN) — up 10.42 percent, at $0.265. Trading volume for this stock is lower, at 5,000 shares vs. its average of 61,285.
  • Canada Zinc Metals (TSXV:CZX) — up 8.11 percent, at $0.20. In all, 542,000 shares have traded vs. the company’s average of 34,979.

While it’s too early to say whether these gains will hold, market watchers do at least seem optimistic that Glencore’s cuts will positively impact the beleaguered zinc market. It will certainly be interesting to watch how the situation unfolds.
Did we miss a zinc stock that gained today? Let us know in the comments!

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. 
Editorial Disclosure: Trevali Mining, InZinc Mining and Zazu Metals are clients of the Investing News Network. This article is not paid-for content. 
Related reading: 
Glencore to Cut Annual Zinc Output by 500,000 Tonnes
Could Glencore’s Fall Signal Broader Issues?
The World’s 3 Top Zinc Mines: An Overview
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