Goldman Sachs: the next 6 months for Zinc to be the strongest

The Financial Times..YESTERDAY
by: Henry Sanderson

Goldman Sachs, one of the most influential banks in commodity markets, is staying bullish on zinc prices for the next six months, predicting the metal’s 50 per cent rally has further to go.

The market is likely to be in a 360,000 tonne deficit this year, as an environmental crackdown on zinc mines in China limits the country from restarting production, the bank said. That could boost prices to $2,500 a tonne by the end of the year from $2,371 a tonne currently, analyst Yubin Fu said.

“We believe the next six months is likely to prove to be the strongest period for zinc pricing for the remainder of this decade,” she wrote in a research note, reports Henry Sanderson, Commodities correspondent.

There has been a shortage of zinc concentrate raw material this year after major mines shut down and miner Glencore cut production.

Still, zinc’s strength is unlikely to last beyond six months, Goldman said. An increase in Chinese zinc supply in response to higher prices could happen as soon as the first quarter of next year which will be followed by Glencore restarting production, it said.

“A major supply response has historically been forthcoming over time at price levels around or higher than current price levels,” Fu said.

Longer-term China’s transition away from an investment-led growth model will prove bearish for metals like zinc, which is used to galvanise steel, she said.

https://www.ft.com/content/8e02246b-1d9d-37ae-8699-e66aa0079c8a