Tag: zinc price forecast

Time to Buy as Zinc Prices Decline in a Major Way

Zinc prices have fallen sharply over the past two weeks.
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While others panic and see this decline as the end of zinc’s bull run, I see this price pullback as a great opportunity to purchase the metal at a good price.
[caption id="attachment_84279" align="aligncenter" width="550"] The 3-month LME zinc price. Source: MetalMiner analysis of LME data.[/caption]
After doubling in price since the beginning of 2016, prices are now struggling in the $3,000 per metric ton level. However, the price weakness seems to come from long position buyers exiting those positions rather than shorts coming to the market. This suggests that sentiment hasn’t shifted to bearish for now. At the same time, we see strong support near $2,500/mt, which could provide a good opportunity to time purchases.

Short-Term Resilient Supply but What About Long-term?

The recent price weakness can be attributed to fears that high prices could trigger more mine supply to come online in China. Refined zinc supply remains resilient in the country, where refined production rose by 4.4% year-on-year in the first two months of 2017. However, they might prove less resilient in the coming months after some of China’s largest zinc smelters jointly announced they will curtail roughly 540,000 mt of annualized capacity over an unspecified period of time. The announcement comes after China’s largest zinc smelter, Zhuzhou, started an indefinite maintenance period for 100,000 mt of smelting capacity earlier in March.
In addition, the second-largest zinc plant in North America has been running at a 50% of normal operating levels since a strike began on February 12. Typical annual zinc production at the plant is 270,000-275,000 mt a year.

China’s Demand Still Strong

Other analysts might be attributing the recent price weakness to slowing Chinese demand. That really hasn’t been the case. China reported growth of 6.9% in the first quarter, its fastest pace since the third quarter of 2015, fueled by credit and infrastructure spending as well as a stubbornly booming property market. The pace accelerated from the 6.8% expansion in the previous quarter and puts China well ahead of its annual target of about 6.5% growth. Growth prospects in the country seem to be improving thanks to easing trade tensions with the U.S.
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Construction and infrastructure make up for more than 60% of zinc’s demand. In China, investment in buildings, factories and other fixed assets grew 9.2% in the first quarter, while construction starts rose 11.6% during the same period. If that’s not enough, in April, China’s government announced plans to build a new megacity from scratch. The construction will require massive amounts of steel and industrial metals.

What This Means For Metal Buyers

Despite recent price weakness, zinc’s fundamentals remain strong. It seems way too early to call an end of zinc’s bull run. This month buyers might find a good opportunity to purchase zinc. You can check out our monthly metal buying outlook for monthly strategies on how to time your purchases.

Zinc Price Rally Heats Up as Refined Metal Market Tightens

[caption id="attachment_83880" align="aligncenter" width="500"] 3-Month London Metal Exchange zinc price. Source: Fastmarkets.com.[/caption]
Zinc prices climbed last week. The metal is now trading near the milestone of $3,000 per metric ton. The last time prices hit this level was in September 2007.
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Zinc has doubled in price since it hit bottom in January of last year. As prices climbed, many buyers probably made the mistake of thinking prices were too high, missing this spectacular rally. However, buyers that subscribe to our monthly outlook, didn’t miss this rally. We recommended buying forward starting in April of 2016. Ever since, prices have risen without looking back.

Zinc Prices Hit a 5-Year High, In Deficit in 2017

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.

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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.

[caption id="attachment_81698" align="aligncenter" width="500"]Zinc hits a 5-year high. Source: MetalMIner analysis of fastmarkets.com data Zinc hits a five-year high. Source: MetalMiner analysis of Fastmarkets.com data.[/caption]

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.

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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.

MetalMiner’s Zinc Price Forecast For the New Year

MetalMiner’s Zinc Price Forecast For the New Year

What were you zincing? That you’d actually get a zinc price forecast for 2015? (Wow, that was perhaps our worst play on words of all time – apologies!)

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What you’re actually getting in this post is much more valuable than one price forecast for one metal at one point in time. Instead, you’re getting a glimpse into how MetalMiner can give your company the tools to make the most effective metal purchasing decisions.

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