Reuters’ Andy Home Questions Bullish Zinc Price Outlook

Reuters’ Andy Home reported that on the London Metal Exchange (LME) the zinc price has risen from less than $2,000 per tonne in mid-March to over $2,400 last week. He states that while that might sound positive, it’s uncertain whether the metal’s good fortune will continue — after all, a “sharp rally” in Q2 2014 ultimately didn’t have much of an effect longer term.

Furthermore, Home is skeptical about falling zinc stocks and about the “underlying story of mine closures and a tightening raw materials sector.”

He concludes:

Sure, the ILZSG is also forecasting a 151,000-tonne supply-demand shortfall in the refined metal part of the market, but that marked a significant downgrade of the deficit expected at the group’s prior meeting in October 2014.

And the key takeaway is that it will not result directly from raw materials supply stress, which forms the core of the bull market narrative for zinc.

Maybe next year as more mines close, but ‘maybe next year’ was one of the reasons zinc’s 2014 rally ground to a halt as investors lost patience with what has turned out to be a remarkably slow-burn story.

This market has been chasing deficit dreams for a long time now and other than the highly questionable signal coming from LME stocks, deficit remains a curiously elusive phenomenon.

Still, maybe this will be the year when it really takes tangible form.

Big emphasis on that word ‘maybe’.

Click here to read the full Reuters report.