Ann: IBG Advances Permitting, page-86

Some people talking about LME on this stock really seem to misinterpret what it actually is.

There isn't a big warehouse with "LME" written on the side of it with 450,000t of Zinc inside as well as all the other metals which fall under the LME banner.

There will be lots of warehouses globally which represent the LME, usually on a licensed basis as opposed to being owned by the LME.

There will of course be "hidden" or "ghost" stocks as sometimes referred. This has been the case since the inception of the LME. The likelihood of hidden stocks out there in regards to Zinc is not only likely, it's actually a reality that has been the case for all 138 years of the LME.

Generally speaking, if LME warehouse stocks are down, the hidden supplies are down also. It makes very little sense as it is fairly difficult for a network of warehouses to be introduced to store a metal tonnage. The LME works because it is a massive market place with huge amounts of stock coming in and going out. If resources are sitting in a warehouse, undeclared, not for sale, they are costing money sitting in that warehouse - storage costs, lighting, staff, etc. Because of this fact, there isn't going to be significant zinc outside of the LME, with the exception of one big player - China.

LME provides buyers and sellers with the biggest market available, as they trade in excess of £10trillion metal annually.

So what are the possibilities for the zinc hidden stocks, now we can identify that there are hidden stocks, as have always been, but will only be dwindling in the same way as the LME?

China is stockpiling?
Very real possibility that this is occurring, in fact I'd say it's almost certain with the deficit between supply/demand becoming more apparent. China is an isolated occurrence and whilst being a huge supplier, they are also a huge consumer - if they're stockpiling, it's not to sell on to anyone else, it will be for their own consumption. A lot in the Chinese news about new rail links, new highways and possible legislation on the galvanising of all exposed steel components used in the automotive industry - some massive potential increases in demand, in fact, the automotive industry has already begun the introduction of galvanising to critical components (such as chassis), although until it is made policy it will only be a steady increase.

Glencore holding the market to ransom?
Probably the only player with enough funds and significant enough zinc exposure to not only create a hidden stock scenario of any meaning, but also one of the few players big enough to benefit from it. Glencore hold a lot of cards and we can't be certain that their Chairman coming out and saying that he sees a huge pressure on zinc as part and parcel of Glencore's play. However, I still can't find a motive for this, why would they want to create hidden stocks away from the LME? To sell later at higher prices? It would need to be a massive quantity to benefit significantly, to a level where the Chairman is going to be talking about it in the press. I'm not overly convinced.

Hidden stocks scenario is rubbish?
Well clearly not. There are definitely hidden stocks. The quantity of them is what is important and more importantly, why the owners are choosing to keep them off the LME. Personally, unless someone can show me a photo or evidence of the metal being stored in any vast quantity (and let's say outside of China) then I'm very sceptical that its anything more than people jumping on the bandwagon of what a single analyst once reported and is just being regurgitated by other so called "analysts".