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Three-month zinc on the London Metal Exchange on Monday reached $2,268 per metric ton and was headed for its biggest gain since October 29. The metal’s long-term prospects remain compelling.
It may only be Monday, but zinc is already having a good week.
Bloomberg reported Sunday that the base metal had advanced for the third day in a row, with three-month zinc on the London Metal Exchange (LME) rising 0.3 percent to hit $2,251.25 per metric ton (MT).
The jump came on the back of economic data pointing to better prospects for demand in China and the United States, the world’s largest industrial metals consumers. Specifically, China’s exports rose 11.6 percent compared to a year ago, while in the US, the jobless rate fell to its lowest point in six years.
“All eyes are on the U.S. and China and they are the ones with positive momentum,” Gavin Wendt, founder and senior analyst at Mine Life, told the news outlet, adding, “[w]e’ve had all the bad news factored in now.”
Since then, the metal’s fortune has only improved. In an article published Monday morning, Bloomberg said that three-month zinc on the LME had jumped to $2,268 per MT and was heading for its biggest gain since October 29. Meanwhile, stockpiles monitored by the LME were down 0.3 percent, at 693,775 MT — that’s the lowest level they’ve hit since August 8.
Macquarie Group base metals analyst Vivienne Lloyd believes that Monday’s rise may have been partially driven by a strike at the Peru-based Antamina mine. It’s owned by BHP Billiton (ASX:BHP,NYSE:BHP,LSE:BLT), Glencore (LSE:GLEN), Teck Resources (TSX:TCK.B,NYSE:TCK) and Mitsubishi (TSE:8058) and is the country’s biggest producer of zinc and copper.
Lloyd told Bloomberg, “[t]wo weeks ago, the workers said they were going to go on an indefinite strike from Nov. 10, and that started this morning. I suspect that’s one of the drivers for zinc prices this morning.” The workers are reportedly seeking bigger bonuses after reduced output and lower prices led to a cut in their profit sharing earlier this year.
Whether or not zinc’s price will continue to rise in the short term remains to be seen — according to The Wall Street Journal, work at Antamina “is being done as planned,” and if that’s the case, a supply disruption is unlikely. However, as those familiar with the base metal are no doubt aware, zinc’s long-term price outlook is positive given recent and upcoming mine closures, strong demand and a lack of new supply. As such, its prospects overall remain strong.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
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