What were the most popular zinc news stories of 2019? Read on to learn what caught the attention of investors this year.
Zinc had a tumultuous 2019, with its price picking up steam all throughout the first quarter only to begin falling in Q2 and remain on a downward spiral for the rest of the year.
The role of zinc smelters proved to be one of the most important things affecting prices, with treatment and refining charges coming in higher than they have in recent memory due to an influx in supply.
Below the Investing News Network (INN) has compiled our most popular zinc stories this year. Many of them focus on smelters and their behavior, given their influence on the price of zinc.
In early March, Rory Townsend, senior research analyst at Wood Mackenzie, gave a presentation at the Prospectors and Developers Association of Canada (PDAC) convention in Toronto regarding zinc’s performance in 2018 and its future.
Zinc’s price did not perform as well as analysts such as Townsend believed it would during 2018, but at the time many were hopeful for 2019, focusing on the behavior of zinc smelters. Townsend’s optimism stemmed from reasons such as increased production from companies like Glencore (LSE:GLEN,OTC Pink:GLNCY) and MMG (HKEX:1208).
He took the time to highlight the role smelters play in zinc’s price, urging investors to pay attention to them as opposed to simply producers.
“Increased availability of concentrate combined with increased treatment charge revenue should enable global utilization rates to increase from 82 percent last year to 86 percent this year,” he said. “Rest of the world, smelters are already operating at around 92 percent utilization, so pretty high, but we’re expecting this to increase to historical highs around 2020.”
In April, major shareholder group Trafigura Group announced it would be taking control of European zinc smelter Nyrstar (OTC Pink:NYRSY,EBR:NYR) in a bid to save the company from bankruptcy.
“Nyrstar has been faced with substantial financial and operational difficulties over the last few years, but it also has very solid industrial and mining operations on which we can build a stable future,” Trafigura Executive Chairman and CEO Jeremy Weir said in a statement.
Nyrstar is Europe’s largest zinc producer and has assets in Canada, Australia and the US.
Major mining company Glencore reached an agreement with Noranda Income Fund (TSX:NIF.UN) earlier this year. The deal entailed Noranda buying Glencore’s zinc concentrate and, in turn, selling the zinc refined metal for the next year.
Noranda, which owns an electrolytic zinc facility and other assets, has locked itself into the agreement with Glencore for four years, although the terms are to be agreed upon annually in light of market conditions and consultations.
Like many of the base metals, zinc’s price reacted to US-China trade talks in 2019, moving alongside the ups and downs. In late March, zinc was doing well as US and Chinese officials inched closer to a deal.
Reuters noted at the time that according to Jinrui Futures, zinc ingot inventories were “extremely low” and that “intense docking” was expected to happen over the next two to three months as China’s consumption of the metal recovered.
While zinc was performing well at the time, analysts were still wary, given its dependence on the trade talks, which have since remained fraught to say the least.
“It would be surprising to me if we did not have more fits and starts, more stop-and-go in these trade talks given the wide range of issues at stake and given the complexity,” Partners Group Chairman of the Americas Charles Dallara told CNBC.
“I see late May, June more as kind of the realistic time frame than I see anything in April. If we move into that time frame, I think some understandings will be reached, and I think that will be a critical step forward,” he commented.
INN caught up with Townsend at PDAC and held a one on one interview with the analyst and discussed the future of zinc market.
“We are expecting (2019) to be the fourth successive year of (zinc) metal market deficit,” Townsend said. Wood Mackenzie was forecasting a metal market deficit of around 500,000 tonnes.
Townsend noted that he expected 2019 to be a good year for zinc as a decline in inventory would likely bolster the price.
“We’re seeing prices peaking at around US$3,700 a tonne in the second half of this year,” he added.
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Securities Disclosure: I, Sasha Dhesi, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.