The bulls and the bears are rarely as polarized as they appear to be over zinc.
A number of recent articles supports the view that either the current surplus could continue into the latter part of the decade and prices languish around current levels as a result, or that demand will continue to rise but supply will become constrained and prices could rise from the current $2,000/ton to over $3,300/ton in a few years!
Which view proves to be right is therefore of more than passing interest for zinc consumers; unfortunately the variables are so uncertain, which one is actually more likely is far from clear.
First, a few facts – then, our outlook.
Zinc Demand By the Numbers
Demand has been strong, and not just from China – galvanized steel production has been rising and zinc consumption has been steadily increasing as a result.
According to the World Bureau of Metal Statistics, the zinc market was in surplus by 123,000 tons during the January to October 2013 period, which compares with a surplus of 308,000 tons recorded in the whole of the previous year.
Chinese demand rose by 13.2% compared with the previous year. While production of locally refined metal in China rose by 12.8% compared with the first 10 months of 2012, as a result, imports into the world’s largest consumer rose steadily from 52,100 tons in August to 60,400 in September, and 74,400 tons in October.
Meanwhile, the WBMS reports that stocks fell by 347,000 tons in the first 10 months of this year. Most of the decrease was recorded at LME warehouses and LME stocks represent over 65% of the global total. Taking the world as a whole, global refined production rose by 6.5% and consumption rose by 7.6% compared with the levels recorded one year earlier, with global demand 768,000 tons higher than in the first 10 months of 2012.
OK, so much for the numbers. Let’s get to the caveats.