Zinc Market commentary - very bullish Interesting article. CZX has 5.3 billion pounds of zinc, 1 billion pounds of lead and 13.2 million ounces of silver.
FOCUS: Multi-year high zinc ‘on fire with no sign of stopping’ - sources
LONDON
Zinc prices on the London Metal Exchange have climbed 23.6% over
the last 12 months with the galvanizing metal firmly in a bull market
and continuing to set fresh multi-year highs.
It has been the best performing base metal on the London Metal
Exchange since 2016. Prices climbed to $3,595.50 per tonne on
Thursday February 15 – the highest since July 2007.
“Last year, no one imagined prices could go above $3,000 per
tonne. Now they can’t imagine them going below that level,” Guy
Wolf, global head of market analytics at Marex Spectron, said.
“That process of an ever-increasing ‘equilibrium’ is typical of a
bull market which is what we are in. The only time to be concerned
is when sentiment is too extreme – that was the case at the start of
February but is not now. There is no ceiling for prices until demand
destruction occurs,” he added.
Zinc prices climbed above $3,000 per tonne for the first time in 10
years in August 2017 and have continued to break through to fresh
levels multiple times in the first two months of 2018.
“The price is on fire, even when the market weakens – like it did
with the equity-sell off at the beginning of February – it recovers
quickly,” a trader said.
“It shows no sign of stopping or correcting, the price is firm and the
bullish view has become the consensus in the market,” he added.
Falling LME stocks have fueled supply concerns, with zinc
inventories recently falling to their lowest since 2008. Stocks have
already fallen 16% so far this year and are sitting at just 151,650
tonnes – with 99% of inventories in New Orleans.
“Prices on the LME continue to record 10-year highs, although the
rally looks impulsive, the fundamental outlook is supportive of
prices,” Sucden Financial’s quarterly report said.
“Lack of availability of material in China persists with
concentrate imports remaining elevated. In our opinion, stock days
of consumption in China will fall below 30 days in 2018. Tight
domestic supply is likely to keep Chinese imports high as smelters
look to keep up with demand,” it added.
“Indeed, the lack of availability for zinc, most notably in China,
has caused a drawdown in global concentrate stock,” Sucden’s
report said.
“The tightness in the concentrate market has not only provided
tailwinds to prices on the LME in recent years, but has inhibited
refined production in China,” it added.
Analysts expect 2018 to be a firmly bullish year for zinc, with the
metal able to ignore any signs of downward pressure; analysts
predict the metal will continue to push to fresh multi-year highs
once again.
“Charts seem to be pretty wide open on the upside until the $3,785
[per tonne] mark, which is the July 2007 high. While we have a
projected high of $3,850 on zinc for 2018 as a whole,” Edward Meir,
INTL FCStone analyst, said.