Zinc Prices Surge as Supplies Shrink
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The amount of zinc held in the LME's global warehouse network fell to a 3 1/2 -year low of 674,375 metric tons on Thursday. While the stockpiles increased by 1,900 tons on Friday, the amount of zinc in LME storage is still down 28% this year.
"That decline in stocks is helping to drive zinc higher, no question about it," said Michael Turek, senior director of metals with Newedge in New York. "In the meantime, demand is quite good in the U.S., and Europe isn't the basket case we expected it to be."
Global demand for zinc is likely to grow 5.7% this year to 13.85 million metric tons and expand a further 5.2% in 2015, according to Morgan Stanley analysts.
Zinc traders have been tapping the LME's stockpiles as they grapple with reduced output from the world's mines.
Last year, Glencore PLC shut down the Brunswick and Perseverance mines that produced zinc and lead in eastern Canada. MMG Ltd.'s Century mine in Australia, the world's third-largest open-pit lead-and-zinc mine, is expected to be closed by the end of 2015, as is Vedanta Resources PLC's Lisheen mine in Ireland. Lead and zinc are often found together, and the deposits sometimes contain other metals, such as silver or gold.
Zinc prices have been ranging mostly above $1700 since 2010 and have recently rallied back to test the $2200 area which has been an area of resistance since 2012. A growing trend of miners closing operations suggests the $1700 area represents a floor where additional production cuts would be necessitated. Some consolidation in the region of the range highs is a possibility but a sustained move below $2075 would be required to question current scope for continued higher to lateral ranging.
Hong Kong listed MMG rallied to break its progression of lower rally highs by April and a sustained move below HK$2 would be required to question potential for some additional upside.
UK listed Glencore has been ranging above the 200-day MA since May but will need to successfully push above 350p to break the medium-term progression of lower rally highs and confirm a return to medium-term demand dominance.
Sweden listed Boliden has been ranging with a mild upward bias for the last year and a sustained move below SEK90 would be required to question current scope for some additional higher to lateral ranging.
From April Korea Zinc found support in the region of the 200-day MA for the first time since 2012. A sustained move below the trend mean would be required to question current scope for continued higher to lateral ranging.
