"Zinc has hit its highest in more than 10 years on concerns over a market deficit, while copper has risen after upbeat Chinese data supported growth expectations in the world's biggest metals consumer.
Zinc stocks held in London Metal Exchange warehouses fell 250 tonnes to their lowest since late 2008, data showed on Thursday, down by a third from their October peak.
"The market is definitely tight. We saw a dramatic fall in stocks last year," said Capital Economics analyst Caroline Bain. "Mine supply fell off particularly in the preceding years, and we started to see that in the refined market, and the fall in refined stocks, last year."
At this point high prices are justified, she said, but added that mine supply is already showing signs of picking up".
“The zinc market is in deficit with LME stocks down 40% in the past 18 months and prices on the rise, up 11% this year. We believe the scene is set for zinc price to appreciate strongly with Wood Mackenzie forecasting market deficits of 150-250ktpa for the next 5 years to 2018.
The major driver is dwindling supply with the closure of several mines which have run out of ore. These include Brunswick 175ktpa (closed 2013), Perseverance 145ktpa (closed 2013), Lisheen 170ktpa (closing this year), Century 500ktpa (closing 2015), Paragashu 45ktpa (closing 2015) and Skorpion 160ktpa (closing 2016). CRU forecast zinc price to rise to US$1.73/lb in 2016 from current prices of US$0.94/lb.
Ref: Zinc Market
PNX Price at posting:
1.4¢ Sentiment: Buy Disclosure: Held
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