Good write up of the zinc market for those who want an unbiased assessment. Gist is short term should be positive/flat due primarily to smelter outages, however expect a drop in prices next year. :
https://www.reuters.com/article/metals-zinc-ahome/column-smelter-outages-prolong-zincs-supply-chain-bottleneck-andy-home-idUSL5N2704S1“Visible and undisputable signs of the growing refined surplus are taking a long while to emerge,” concedes JPMorgan.
The bank is forecasting an average price of $2,250 per tonne this quarter, “only slightly lower than spot, to account for a bit more sideways trading in the near term as market participants wait for stronger evidence of surplus”.
LME three-month zinc is currently trading around $2,430 per tonne.
Next year, though, JPMorgan is looking for the zinc price to drop “towards cost support and a quarterly average low of around $1,850/t in 3Q20”.
It is in good company.
Macquarie Bank expects the zinc price to be “held down for 2-3 years closer to $2,000/t”. (“Commodities Compendium”, Sept. 23, 2019).
Morgan Stanley has just cut its 2020 forecast to $1.01/lb ($2,227 per tonne) with “a move into persistent surplus driving price to marginal cost by end-2020”. (“Metal & Rock”, Sept. 23, 2019)
Goldman Sachs is equally bearish, slashing its three-month and six-month forecasts to $2,150 and $2,000 from $2,500 and $2,400 respectively.
It now expects zinc to hit a low of $1,850 in 12 months’ time, down from a previous low call of $2,300. (“Zinc: Back to surplus after supply twists and turns”, Sept. 5, 2019)
The bear logic is unarguable.
Mine supply is unquestionably increasing and demand is unquestionably deteriorating, as is the case across the base metals spectrum.
