And lest I give the impression I'm not very excited about the Zn...

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fightinggreed

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13/07/17

09:50

Post #: 25837221
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Originally posted by fightinggreed ↑

Hi @Plext,

I think your chart is an excellent on to keep in mind and the analogy to 2006 is a strong one. I'm not sure we should expect history to repeat itself exactly though. I think history recapitulates rather than repeats. For example in 2006, I doubt there was a market participant like Glencore sitting in the sidelines with 500kT/year of idled capacity. Yes, this capacity will take 15-18 months to bring back on stream. Yes, it can be brought back on stream incrementally and will be managed to maximise Glencore's profit. But I would still expect a longer more rounded peak to the pricing this time compared to then. Glencore will want to avoid a situation where other players bring on large amounts of supply. Apparently they have calculated this price to be US$1.60/lb. Barring a Chinese recession, I think we can expect to see prices stabilise around there within about 3 months and trade at that level for the medium term.

Cheers,
Tim.

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And lest I give the impression I'm not very excited about the Zn supply crunch coming, let me point out another difference between now and 2006. In 2006, the whole commodities complex was running together into bubble territory. This time Zn is running alone. That gives this move the potential for more longevity as the economic imbalances caused by high prices don't have the same impact on the rest of the economy.

Cheers,
Tim.

RVR Price at posting: 24.0¢ Sentiment: Buy Disclosure: Held
4 Upvote

0 Great analysis

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