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Salman Partners: Zinc supply in China is very price-elastic

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According to Salman Partners:

https://personal.crocodoc.com/0ljBVLL

Zinc

Supply in China is very price-elastic

This morning, the price of zinc (basis: 3-month contracts on the London Metal Exchange) fell 0.4% to US$0.936/lb. Says Mineweb, “despite an anticipated zinc deficit with ongoing mine closures, the spot price of zinc fails to get a lift”.

Mineweb cited the conventional view that “later this year the Century zinc mine in Australia is expected to close, among other mines in the next couple years... zinc-miner Nyrstar, said that 500,000 tonnes would evaporate from the zinc market when Century closes.” On this basis, Mineweb cites forecasts such as “zinc prices could climb as high as [US]$1.60-$1.70[/lb] in 2016-2017”.

However, Mineweb also cited the reason why we are skeptical of such price forecasts: “one x-factor, however, is how Chinese domestic supply might respond to increasing prices – perhaps coming online again quickly – if [higher prices] ... come.”