Large grades of Zinc and Lead to be found TRF's Telephone Dam prospect.
Investors have been focused on nickel "plays" as prices rose following Indonesia’s decision to ban raw material exports on Sunday, but other metals have also been affected including zinc.
As a case in point, Barclays had earlier this week raised its zinc price forecast for 2014 to US$2,138 per tonne this year citing improved demand outlook for industrial metals.
Zinc is currently trading at US$2,054 per tonne on the London Metal Exchange, a sharp gain from the US$1,825 to US$1,900 range it was trading at in November 2013.
Barclays said it expects “the global refined zinc surplus to shrink markedly this year” and for the market to move into its first deficit in almost a decade in 2015.
Notably, warehouse zinc stock levels have fallen almost 30% over the past 12 months to less than 900,000 tonnes, which is less than one month’s global zinc consumption.
This could be due to ongoing mine closures, including the Brunswick and Perseverance mines, and limited new production slated to meet the shortfall.
Adding to potential supply problems, the next generation of zinc miners are at an early, pre-funding stage and are mostly located in countries with high sovereign risk.
Zinc Usage/Opportunities
About half the zinc is used for galvanising metals in the construction, roofing and vehicle industries, followed by brass and bronze (17%), alloying (17%), zinc semi-manufactures (6%), chemicals (6%) and the remaining four per cent in various sectors.
Given that China galvanises just 4% of the steel it produces, far less than the 18% average used in the Western World and that its level of vehicle ownership relative to its population is currently less than the United States’ during the 1920’s – China’s growth has just started and will also lead to a rise in zinc demand.
China used close to 5500 tonnes of zinc in 2011, which is four times as much as a decade ago, and a stagging ten times more than twenty years ago.
In addition, some forecasters have estimated that global demand would double within the next few years.
TRF Price at posting:
9.5¢ Sentiment: LT Buy Disclosure: Held
