Is Zinc Headed for a Bear Market?

While most market watchers are bullish on the outlook for zinc, that’s not the case for all. Case in point: Bloomberg published an article on Friday that makes the case that zinc is “on the verge of a bear market” because Chinese output is pushing production levels “to a record, outweighing a global deficit.”

As quoted in the market news:

The metal used to rust-proof steel has dropped 16 percent from a three-year high on July 28, close to a 20 percent drop that commonly defines a bear market.

Zinc is set to join other metals including tin and nickel in slipping into a bear market as increasing supplies weigh on prices amid weakening Chinese demand. The country’s zinc smelters are boosting production even as the government cut its economic growth target in 2015 to the lowest in more than 15 years. The LMEX Index of the main six base metals traded on the London Metal Exchange is near a five-year low.

The news outlet quotes Andrew Thomas of Wood Mackenzie as saying:

The wrinkle is what the Chinese smelters are going to do. If they were to sustain refined production at the same sort of levels, they could eliminate that deficit.

Click here to read the full Bloomberg report.