Zinc supply crunch is finally here..

Chinese-owned MMG Ltd. is seeking new zinc mines in Peru, which has the world’s third-largest reserves, after a dearth of global exploration in past decades led to an output crunch.

“We’re looking at places like Peru where there’s a lot of zinc,” and the company’s Las Bambas copper mine there offers a base to explore opportunities, Chief Executive Officer Andrew Michelmore said. “The crunch has finally come,” he said on conference call Thursday.

Zinc, used to rustproof steel, has surged more than 50 percent from its January low as production cuts at Glencore Plc’s mines and closures at MMG’s Century and Vedanta Resources Plc’s Lisheen operations reduced supplies. Goldman Sachs Group Inc. forecasts a widening global shortage with prices rising to $2,500 a metric ton in six months, compared with $2,185 on Thursday.

MMG, based in Melbourne and owned by China Minmetals Corp., expects to produce 120,000 tons to 135,000 tons of zinc in 2016 from mines in Australia. The Las Bambas operation in Peru will probably produce 250,000 tons to 300,000 tons of copper in concentrate this year, the company estimates.

“There is so little zinc around,” Michelmore said. “Those people who are in zinc are also bullish about the zinc market so they don’t want to sell. That’s why we keep coming back to the focus we’ve got on finding zinc.”
Goldman says the global shortage will expand to 360,000 tons in 2017 from 114,000 tons this year. The metal is the best performer on the London Metal Exchange in 2016 as stores in warehouses monitored by the bourse have fallen about 30 percent from a September peak.

“We are very positive about the zinc industry and we’re keen to be involved with more of it, but it’s challenging,” Michelmore said. “We have exploration programs and we’re looking at extensions to current mines.”

Peru has the world’s biggest zinc reserves after Australia and China, U.S. Geological Survey data show.

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