Lead and zinc are two metals that performed well last year.
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Both metals have a pretty neutral supply/demand story, in which production is outpacing demand but not by much. However, both metals are falling as China’s bearish momentum hasn’t changed, it’s actually gotten worse.
World lead production, minus usage. Graph: MetalMiner.
The lead market has been in surplus over the past few years. However, production versus usage has been pretty stable since 2013, which might have caused prices to remain pretty stable since 2013.
Three-month London Metal Exchange lead since 2011. Graph: MetalMiner.
However, lead broke that price range this year leading it to more declines. It seems like although the supply/demand picture hasn’t really changed over the past few years, concerns about China are what’s really weighing on this metal.
Zinc’s supply/demand equation is a bit different:
World zinc production minus usage. Graph: MetalMiner.
After two years of deficit, zinc supply has outpaced demand so far this year. The main reason for this shift involves China, which is now producing more and consuming less zinc. Chinese imports of refined zinc have decreased by 66.3% to 126 kilotons, according to the International Lead and Zinc Study Group.
Three-month London Metal Exchange zinc since 2011. Graph: MetalMiner.
With this shift in demand/supply and a bearish market in China’s future, zinc prices have fallen more than 30% in less than four months, a sharper decline than lead’s. The metal is now at a five-year low and heading south.
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