Zinc: Why It’s This Metal’s Time to Shine

Zinc inventories (supply) have been falling like a rock

James Fraser | February 16, 2017 | Pennyminingstocks.com: Zinc was the second-best performing commodity in 2016, with a staggering 65.7% return.

The greyish metal primarily used in galvanizing steel is off to a hot start in 2017, up another 12.5% to $1.30/lb.

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“For us zinc is still the most exciting story out there,“ said Don Lindsay, President and CEO, Teck (January 26, 2017).

The reason for the zinc price rise is one of the basic principles of economics – supply and demand.

Zinc inventories (supply) have been falling like a rock. Inventories last February on the LME were ~500,000 tonnes and are now down to ~380,000 tonnes.

Two of the largest zinc mines in the world have closed in the last few years (Century and Lisheen) due to ore depletion, removing ~4 % of world supply.

The world’s largest mining company, Glencore, significantly helped the zinc market as well cutting production by 500,000 tonnes in late 2015. The cuts were made because of the low price of zinc at the time. Glencore has yet to restart production at these mines and this will be a major factor for investors in zinc to keep an eye on.

Zinc demand has steadily increased throughout the last several years and is expected to increase by 2.1% to 13.85 million tonnes in 2017.

The zinc price is now at a 5 year high of $1.30 per pound as inventories are also near a 5 year low at ~380,000 tonnes (LME). Shanghai Futures Exchange stocks have also declined substantially in the last 3 years.

How high can zinc go in 2017?

As inventories continue to decrease along with no new mine supply expected, a pinch point appears to be coming for the zinc price.

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