Zinc prices jumped to a new five-year high on Monday, just as the International Lead and Zinc Study Group (ILZSG) released its 2017 forecast.
The group continues to anticipate that the supply of refined zinc metal will be constrained by a sharp reduction in the availability of zinc concentrates and that global usage in 2016 will exceed production by 349,000 metric tons resulting in a further drawdown of both reported and unreported stocks. In 2017, the market is expected to remain in deficit with the extent of the shortage forecast at 248,000 mt.
Over the past few weeks, zinc struggled to build on gains, resting at $2,400/mt, a level from where investors stopped chasing prices higher in previous years.
The fact that prices rose above this level despite the pressure of a stronger U.S. dollar is quite bullish. Investors are still buying on zinc’s bullish narrative of supply shortfall. Zinc market sentiment is poised to remain bullish.