Goldman Picks Zinc as the Bull

Goldman Picks Zinc as Bullish Exception in Bearish Metals World

• Raises zinc price forecasts, sees ~11% upside over 6-12 months
• Sees stronger China demand after infrastructure spending rose

Goldman Sachs Group Inc. raised its price forecasts for zinc over the next 12 months as increased demand from infrastructure spending in China makes it the bullish exception in a bearish base-metals market.
The bank increased its six and 12-month forecasts for the metal used to galvanize steel to $2,100 a metric ton from $1,700 a ton previously, according to a report dated May 19. It raised its outlook for prices in 3 months to $2,000 a ton, from $1,800 a ton previously. Zinc for delivery in 3 months traded at $1,870 a ton on the London Metal Exchange at 1:50 p.m. in Shanghai on Thursday, up 16 percent this year.
Zinc will get the biggest boost from a pick up in spending by China because it’s the most exposed to infrastructure-driven demand, according to the bank. It’s also most bullish in terms of supply amid mine depletion and producer discipline while other base metals will struggle under the weight of very strong supply growth in the second half, it said.

“Zinc’s relatively high exposure to the infrastructure pick-up leads us to upgrade our Chinese zinc demand growth assumptions, thereby requiring higher prices in order to incentivise a sufficient (and substantial) mine supply response over time,” Goldman analysts including Max Layton wrote in the report.
Goldman estimates that a quarter of the demand for zinc comes from the infrastructure sector. Galvanized steel output accounts for about 50 to 60 percent of zinc use in China, it said.

http://www.bloomberg.com/news/artic...-as-bullish-exception-in-bearish-metals-world