Zinc Hits a 10-Month High Despite Metals Weakness

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Tin and zinc were the base metals with the most bullish outlook this year. But tin’s outlook worsened after Indonesian tin exports recovered in April.

Two-Month Trial: Metal Buying Outlook

That leaves zinc as the favorite child among base metals both in terms of fundamentals and price performance this year.

Zinc production - usage

Zinc production – usage. Source: MetalMiner.

According to preliminary data recently compiled by the International Lead and Zinc Study Group (ILZSG), the global market for refined zinc metal was in surplus by 42,000 metric tons over the first three months of 2016 compared to a surplus of 143,000 mt over the same period in 2015. The numbers suggest that the metal is slowly moving into deficit territory. Indeed, that’s what the ILZSG forecasts.

The group is predicting mine supply outside of China to contract by 9.4% this year due to a combination of mine closures and price-related cutbacks. Some of these are mines that were supposed to close but continued to eke out production like the giant Century mine in Australia, and the now closed Lisheen mine in Ireland.

On the other hand, ILZSG is forecasting a 12.4% lift in Chinese production, which would translate into a 1.4% fall in global output this year. On the demand side, the group forecasts world usage of refined zinc to grow 3.5% in 2016 due mostly to a 4.5% increase from demand in China.

Zinc hits 10-month high

Zinc hits 10-month high. Source: FastMarkets.com.

Investors’ optimism about zinc’s outlook helped the metal hold its value well in May while the rest of the  base metals fell. On Wednesday the metal hit a new 10-month high, outshining its peers. On the other hand, while we suspect to see zinc prices significantly rising we still need to see more bullishness in commodity markets and, of course, a weaker dollar.

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