Higher zinc pricesbodes well for the Dragon....
Zinc Prices set to continue to explode
Silver Stock Report
by Jason Hommel, October 27, 2006
Zinc Prices are up 13% over former highs!
Since I'm such a long term thinker and planner, I'm not used to making predictions that come true so strongly within a month, except when I write up a stock, which can move up 30% the next day.
In my last report on Oct. 11th,
https://silverstockreport.com/email/zinc_lead.html
I wrote that zinc prices were breaking out to new highs, above $1.70/lb., and today, a mere 16 days later, zinc prices hit $1.92/lb., 13% higher.
Most investors don't care about zinc, or don't understand the fundamentals. I'll try to keep it simple.
Zinc inventories at the LME are the primary location for zinc stockpiles in the world. Zinc inventories are being rapidly depleted from a high of about 700,000 metric tonnes in 2004, and yet now stand at just over 100,000 tonnes.
Source:
https://www.kitcometals.com/charts/zinc_historical.html
(You have to check out the kitco graphs at the link above, it says everything!)
These zinc tonnes are 3.5 days worth of world demand, and will last about 100 days. Confused? The 3.5-day figure assumes all zinc mining in the world stops completely. The 100-day figure assumes zinc mining will continue, and that the deficit between demand and supply will consume the stockpile in about 100 days, unless things change in the next 100 days.
The only thing that can change, and must change, is the zinc price. Prices must rise to choke off world zinc demand.
Think about that for a moment. Mildly rising interest rates are probably not capable of slowing down the growth of the world economy. It has come down to the lack of zinc that is more likely going to do it, because about 75% of zinc is used to galvanize steel, for use in things like cars and building construction.
The annual deficit in zinc is about 420,000 metric tonnes.
Source:
https://www.financialexpress.com/fe_full_story.php?content_id=144642
Again, you can see that the 113,000 tonnes of zinc left will only last just over 3 months, unless prices rise high enough to choke off world zinc demand.
The reason why mine supply will not increase in the next 3 months is that it takes about 5-10 years to bring new mines to production. In short, people do not understand how slow, how difficult, and how expensive it is to rev up the "old economy". It's not as easy as throwing up a web site, or writing an article, or buying a stock tomorrow. Even if many of the zinc projects were fully funded, and they are not, it would still take years from today to increase zinc production!
Many of the zinc market leaders are saying that it will take at least 2 years from today to increase zinc production. That includes projects in the mine construction phase, such as Apex Silver in Bolivia, which seems to be having trouble with the newly elected Bolivian dictator repeatedly saying he will confiscate the entire mining industry! Many zinc production estimates were counting on projects such as Yukon Zinc's Wolverine deposit coming to production, which recently hit feasibility difficulties. Feasibility was also delayed on Metalline Mining, which recently announced that they may take up to 12 to 18 months more to complete feasibility. And after feasibility then comes project financing, which may take 6-12 months, and then mine construction that can also take a few years!
I'm absolutely convinced that we must see a bubble in zinc prices within the next 3 months to choke off world zinc demand, or else we will run out of zinc. Furthermore, such higher zinc prices must stay high for the next 2 years! The reason is that the paper futures market manipulators cannot short to death a physical commodity that requires delivery! But zinc prices may continue higher even after 2 years! Two years from now, supply and demand still may, or may not, be in balance, but we can evaluate things then. Or even within 3 months!
The 3-month zinc supply must last 2 years--8 times longer than current rates of depletion indicate!