Zinc; further evidence for rally support

Zinc pauses though support for rally seen intact

Zinc's rally paused on Thursday as markets waited to assess strength of demand in China, but shortages created by mine closures are expected to feed further gains.
Benchmark zinc on the London Metal Exchange ended down 0.8 per cent at $US2255. The metal used to galvanise steel hit $US2299 a tonne on Tuesday, its highest since May 2015 and a gain of nearly 60 per cent since a January low.
"I wouldn't be surprised to see zinc prices strengthen further, mining supply is unlikely to come back any time soon," Commerzbank analyst Eugen Weinberg said.
Recent closures include the giant Century mine in Australia and the Lisheen mine in Ireland.

Output cuts, such as those undertaken by Glencore, due to previously low prices have also contributed to expectations of shortages this year and next.

"We now see zinc prices rising to a peak of $US2500/t over the next 6 months, which should be enough to result in a sufficient global supply response, Goldman Sachs analysts said in a note.
Analysts and traders are waiting for trade data due next week from China, the world's largest consumer, to see whether a trend of rising zinc metal imports is intact.
A recent Reuters survey showed the zinc market deficit this year at 221,000 tonnes this year and 269,000 next year.

One sign of a tighter market are zinc stocks, which in LME approved warehouses have fallen about 30 per cent since September last year to 430,075 tonnes.
"The rally was ultimately triggered by a tightening concentrates market on the back of permanent, as well as temporary mine closures," Bank of America Merrill Lynch analyst Michael Widmer said in a note.
"Treatment charges have also dropped hard, a dynamic that provides imminent headwinds for those smelters, many of which are Chinese, that purchase ore on the spot market and not through contracts."
Widmer said treatment charges - payments made by miners to smelters to have their concentrate turned into metal - have fallen towards $US100 a tonne from $US205 in April 2015.

The charges increase when supplies rise as mining groups compete to find smelters to process their material.
Other industrial metals were also under pressure due to a higher US currency, which makes commodities more expensive for non-US firms.
Three-month copper closed down 0.9 per cent at $US4831 a tonne, aluminium fell 1.1 per cent to $US1622.5, lead lost 0.5 per cent to $US1795, tin rose 0.4 per cent to $US17,995 and nickel ceded 1.2 per cent to $US10,605.

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