Will the Zinc Price Continue to Rise?

Mineweb’s Kip Keen said in a recent article that the zinc price is starting to show signs of life once again, having crossed the threshold of $1 per pound. However, in his piece he questions whether the base metal will be able to keep its head above that level for long.

As quoted in the market news:

Now, the question is, with zinc surging again is this time any different?

Zinc bulls will point to the fact that LME stocks have halved over the course of two years.

Yet, as Reuters columnist Andy Home recently noted, it seems at least some of that falling stock may be a distortion. He wonders if stocks might be hiding away, rather than feeding demand (zinc = galvanising).

Bulls will also point to closing mines. Indeed, this year there will be important closures. Chief among them are Vedanta’s Lisheen mine in Ireland and MMG’s Century mine in Australia.

Yet alongside this narrative of closures, are mine expansions. Indeed, big ones. This year. You hear less about these.

For example: Glencore is ramping up Lady Loretta and Mt Isa and expects to produce 200,000 tonnes more zinc this year than last (zinc outlook page 136 of Glencore presentation). That’s a little more than Lisheen recently produced it’s worth remembering.

Expansions such as these have tempered some analyst expectations for zinc. As BMO’s Jessica Fung (neutral zinc) put it in an email earlier this year, “For me this pushes out the bull story to at least 2016 if not later”.

A point Fung and others raise also raise: very strong zinc-mine growth in China. Unlike metals like copper, or gold for that matter, China has a substantial zinc mining sector (in all China accounts for more than a third of total world refined zinc supply.) In recent years its domestics supply has grown rapidly in response to demand.

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