Zinc, one of base metals mainly used in construction and car production, is having a challenging year. Its quarterly loss totaled 5 percent in the first three months of 2014.
“Zinc has always been viewed as a metal in reasonably good demand, periodically Chinese would stockpile zinc for their strategic reserves, it’s an important metal for industrial development, because, for example, if you had an increase in car production, this means that consumption of zinc would probably go up… The market had quite a big access of the metal in warehouses, which probably put the zinc price under pressure,” said Dinnur Galikhanov, a Senior Analyst for metals and mining in Aton, explaining the reasons for such a loss.
In the last 18 months there’s been a huge reduction in zinc stock globally. People were actively buying zinc due to increasing car production and construction. Analysts also expect the metal to come under serious constraint in the coming years because mines deplete their reserves and exploration efforts over the past decade haven’t been able to replace the pace of extraction.
MMG Limited’s Century zinc mine in Australia, which is currently number three in the world, undergoes a transition period, meaning that it will no longer produce zinc as of 2015. The Lisheen mine, owned by India’s largest miner, the Vedanta Group, which currently produces 132,000 tonnes of zinc concentrate annually, is set to close in 2016.
Some market watchers are extremely optimistic in their forecast for zinc prices. Patricia Mohr, Scotiabank’s Vice President of Economics and Commodity Market Specialist who, in 2012, won the Metal Bulletin Apex award for the top gold and overall precious metals price forecasts when she was 99.63% accurate in her call on the price of the yellow metal that year, said zinc is setting up for dramatic price returns already next year.
“Commodity funds & investors have bid up zinc prices, anticipating tightening supplies over the next three- four years — with mine supplies not keeping pace with demand growth. In our view, zinc prices will climb to $1.25 in 2015 and a very lucrative $1.6-1.7 in 2016,” Patricia Mohr noted in a recent report,” Patricia Mohr said.
Others are more skeptical, saying the base metal is unlikely to make much headway over the next few months as China is increasing the output to benefit from the high prices. A sign of things to come could possibly be another fall in zinc prices.
