Zinc Prices to Outshine Other Metals in Q1 2015

The price of zinc will perform strongly during Q1 2015 due to favorable market fundamentals, to outshine other metals, Futures Daily said in a research note.  

"Despite the broad sell-off in nonferrous metals market, zinc has held up quite well recently, and zinc will lurch higher once the dollar softens," it foresees.  

China is expected to see a lower growth of zinc output due to tightening ore supply worldwide and acceleration of inefficient capacity elimination in China. Zinc demand in China, reflected by high output of galvanized plate/sheet, is strong. 

Production of galvanized plate/sheet hit a new record high of 4.82 million tonnes in December 2014, thanks to growing consumption in the automobile sector and robust exports.   

Moreover, exchange inventories, both in SHFE and LME, have been falling, which will also give a boost to zinc prices.   

Zinc and nickel price upside 'imminent': Clarus

There has been a lot of bullish talk in the metals community about zinc and nickel over the past couple of years, as many insiders believe those commodities are poised for a rally. You can include Clarus Securities analyst Mike Bandrowski in that group.

He published a detailed note on Tuesday that suggests zinc and nickel have "imminent" upside and will perform very strongly over the next two years as inventories disappear.

In the case of zinc, Mr. Bandrowski noted the market is already in deficit, and that deficit should get bigger following the closures of the Lisheen and Century mines this year. He said exchange inventories have fallen by more than half over the last two years and should be at "critical" levels later in 2015.

"We believe the lack of funding in zinc mine development and exploration has now caught up with the marketplace and zinc prices will respond in 2015," he said in a note.

"Despite the broad commodity sell-off, zinc has held up quite well, likely an indication of the favourable supply/demand fundamentals."

Nickel has received more attention than zinc due to an Indonesian export ban on raw ore that was imposed a year ago, which removed about 25% to 30% of global nickel supply. The nickel price spiked following the ban, but fell back to earth as inventories dramatically increased.

Mr. Bandrowski's said the inventory spike was partly due to a well-publicized trading scandal in Qingdao, which created disruptions in Chinese nickel stockpiles. He expects inventories to trend lower in early 2015 as Indonesian stockpiles are exhausted in China, and thinks the market is heading toward deficit this year.

"We see a great opportunity for nickel in 2015," he added.

Mr. Bandrowski sees the zinc price rising to US$1.10 a pound this year and US$1.25 in 2016, while nickel is expected to jump to US$11 a pound in 2015 and US$12 in 2016. His top picks among the miners in this space include Lundin Mining Corp., Scorpio Mining Corp, Aldridge Minerals Inc. and Royal Nickel Corp. He also highlighted a few names that he doesn't cover: Talon Metals Corp., Sherritt International Corp., Tinka Resources Ltd. and Goldspike Exploration Inc.

Global zinc market in 255 kt deficit during Jan-Nov '14: ILZSG

The latest statistics published by the International Lead and Zinc Study Group (ILZSG) indicates that global refined zinc market was in deficit of 255,000 tons during the initial eleven-month period in 2014. The total reported zinc inventories declined by 326,000 tons during the same period.

The zinc mine output reported declines in Australia, Canada, India, Ireland and Namibia. However, the fall in output was covered with the increased mine output from other countries including China, Mexico, Peru, Sweden and the United Sates. Overall, the zinc mine output grew by 1.9% during the initial eleven months of 2014, in comparison with the previous year.

The refined zinc metal production during the eleven-month period totaled 12.296 million tons, 4.16% higher when compared with the 11.805 million tons output during corresponding eleven-month period in 2013. The rise in refined zinc metal output was mainly due to increased output from China.

The global demand for refined zinc metal increased by 5.4% to 12.551 million tons during the initial eleven-month period in 2014. The Chinese apparent usage increased by 10.5%. The US reported a demand rise of 3.9%. On the other hand, apparent consumption in the Europe region declined by 1.6%.

The global mine production during the month of Nov ’14 alone totaled 1.213 million tons. The refined zinc metal output during the month totaled 1.207 million tons. The global demand for the metal totaled 1.190 million tons during the month.

Scotibank's Mohr brightens zinc forecast

 A number of zinc mines in the world are being shut down, which will in turn lead to consecutive closures. In addition, the Scotibank had forecasted that, there will be an increase in the demand for the metal, as the demand for galvanized steel for automobiles are increasing in China.

The metal, which was being sold at 2 dollars per pound in the year 2007, has dropped lower to 0.50 dollars per pound in the year 2009. Since the year 2009, the price of the metal has rebounded. In the year 2014, the price of the metal reached 0.96 dollars per pound. Mohr is predicting that the price of  the price of the commodity will rise and reach to 1.61 dollars per pound in the year 2016, and then will again hike to 1.70 dollars in the year 2017.

Mohr stated that, there is a possibility that, the market of zinc concentrate, will shift into deficit by the year 2016.he also added that, both the commodity funds and the institutional investors have noticed that  this possibility, and they have already started taking positions in zinc.

The increase in zinc price might be helpful to offset the pummeling companies like, Teck Resources. The company has already taken down metallurgical coal off their business line.

The company operates a zinc and lead smelter, which is located in Trail B.C, and it has also recently initiated Pend Oreille zinc-lead mine, which is located in the Washington State. The company completed its first shipment of zinc oxide in the month of December 2014.

This could be the explanation for the question which is now asked by several investors, why the stock of Teck, a company which had lost about 51 percent of its value between the month of July and mid December, hiked back again to the game with an increase of 21 percent in the month of December 2014.  Zinc has also been helpful in hiking up Myra Falls Mine, which is located on the Vancouver Island. The main product of the mine is zinc, but the company also focuses on producing gold , copper, silver.

Mining in 2015: Zinc price with zing

What happened in 2014:

Zinc became the darling of the mining world, reaching a near three-year high mid-2014.

The four-letter metal benefitted from falling stockpiles and expected supply cuts due to the scheduled closures of among others Australia's Century and the Lisheen mine in Ireland with a combined output of 600kt.

By September doubts were creeping in and the metal’s stellar run began to look as if it could’ve been too much too soon as mothballed mine restarts were fast-tracked in North America and new capacity were planned everywhere from Sweden to India to Mexico and Peru.  

Zinc will end the year up single digits only, but that’s no mean feat into the teeth of a rampant dollar.

How things will change in 2015:

When stock levels fell below three weeks’ worth in 2006 and 2007 the price shot up to nearly $4,000

Once sky high stocks on the LME and in China will continue to be drawn down – zinc is especially sensitive to stock levels and when it fell below three weeks’ worth in 2006 and 2007 the price shot up to nearly $4,000.

New mines ­– even in China which has added 225kt capacity every year for the last decade – aren’t opening at a fast enough rate to replenish lost output and meet demand growing at 4% per year.

That said, there are plenty of projects out there and expansions like Glencore’s McArthur River will hit its stride at 370,000tpa in 2015. Refined output from South Korea will jump and projects like Zijin’s 200kt Bayannur smelter will make zinc not all that hard to come by.

Price end-2015:

Well up, but $2,400 seems like the ceiling for 2015. 2016 could have more upside.

All bets are off if…

A stockpile shock panics the market.

Zinc, nickel Scotiabank’s top picks for investors

“Base metals were a ‘bright’ spot in 2014—largely ignored by equity markets and are among our ‘picks’ for investors in 2015,” observed Scotiabank economist Patricia Mohr in the latest edition of the Scotiabank Commodity Price Index published Thursday.

“LME nickel and zinc ranked No. 3 and 5 within the ‘Top Five’ best-performing commodities of 2014,” she said, “with price gains of 19.8% and 11.6% respectively in the year through December 15, 2014.”

“However, a focus by investors on copper, widely expected to edge down in 2015 alongside ongoing mine expansion, seems to have taken the shine away from these metals in the equity markets,” Mohr suggested.

Meanwhile spot uranium prices bottomed in June, she noted, “given Japanese approval of two nuclear reactor restarts, posting a 7.2% y/y gain. …After a recent election win, Japan’s Prime Minister is expected to push for additional reactor restarts to boost a sagging Japanese economy.”

“The base term, contract price for uranium has increased from US$45 to US$49, a positive sign for a gradual recovery in coming years,” Mohr advised. “Cameco’s Cigar Lake mine in Saskatchewan continues to ramp up towards 18 million pounds by 2018.”

“To build shareholder value in a lackluster economy, mining companies will focus on ‘divesting non-core assets’ and ‘spinning-off undervalued operations’ (e.g. Sudbury nickel),” Mohr predicted.

‘Picks’ for 2015

Mohr forecasts average prices of $1,267/oz gold, $1.25/lb zinc, $9/lb nickel, $3/lb copper, and $42/lb uranium in 2015.

Zinc and nickel are Mohr’s top picks for investors in 2015.

In her analysis, Mohr said zinc prices strengthened in the second half of this year, averaging US$1.03/lb, “with investors and commodity funds expecting zinc concentrates to move into a supply-side deficit by 2016 alongside significant depletion. Century—the world’s third-biggest zinc mine—is expected to close in 2015:Q3 and Lisheen in Eire by late 2015 or early 2016.”

“Prices remain resilient at US$0.96 in mid-December (9 US cents higher than a year ago), despite further signs that China’s economy is slowing,” she noted.

“In the first sign of a response by mining companies to the coming shortfall in zinc, Vedanta has announced its intention to proceed with developing the Gamsberg zinc mine in South Africa (250,000 t/a by 2018),” observed Mohr. “We expect interest in ‘junior mining projects’ in zinc to intensify within several years.”

“Nickel prices should also outperform in 2015, benefitting the Sudbury Basin, Thompson Manitoba, northern Quebec (Raglan) and Labrador (Voisey’s Bay),” Mohr advised. “Prices will climb from this year’s US$7.67 average to at least US$9.00 in 2015 (+17.3%) and US$11.50 per pound in 2016.”

“This largely reflects the impact of Indonesia’s ban on the export of all ‘unprocessed’ nickel-containing ore on January 12, 2014, in a bid to encourage foreign buyers to update ore in Indonesia,” she said.

‘Nickel prices are expected to soar once NPI (Nickel Pig Iron) plants in China have used up their inventory on hand—forcing Chinese stainless steel producers to turn to more costly imports of FeNi and nickel cathode,” Mohr predicted.

“The global supply & demand balance for nickel is expected to turn from ‘surplus’ to ‘deficit’ by 2015:Q2, even assuming a slower pace of stainless steel production gains in China (5.5% in 2015, after a 10% gain in 2014),” she suggested.

Meanwhile, palladium was the strongest of the precious metals in 2014 with a 12.2% y/y gain as strong demand for catalytic converters for small-engine gasoline-drive cars and supply constraints boosted prices, Mohr noted.

Nevertheless, the Scotiabank Commodity Price Metal & Mineral Index posted the worst year-over-year decline of any sub-component in 2014 with the decline centered in ferrous metals, especially iron ore and coal, she advised.

Zinc demand to outcast supply by the end of 2014, says ILZSG

According to the estimation released by the group, the demand for zinc would rise about to 13.65 metric tonnes, which is a 5.1 percent increase compared to the present situation, and will be followed by an additional increase in demand of 14.05 million metric tonnes, which is another 2.08 percent increase.

The anticipated increase in demand is expected from China as the production of galvanized sheet  in the country, is reported to have risen to a large extend. According to the reports from the International Lead and Zinc Study Group, the increase in global demand of zinc excluding the demand from China, is rather low, which is reported to be 2.3 percent hike in the year, 2014 and 1.3 percent hike in the year 2015.

The group also stated that, in Europe, 1.2  percent hike in demand is expected this year and 1 percent hike in demand is expected the year after, after remaining constant through the year of 2013.  In the year 2014, a sharp increase in the demand of zinc is expected with a raise of 8.4 percent, followed by the large scale import of zinc into the United states, even so the demand from the United States will decline in the year 2015 to 0.4 percent.

At the same time the production of zinc is expected to have a slight hike of 1 percent to 13.33 million metric tonnes in the year 2014, and a 3.8 percent increase in the production by 13.80 million metric tonnes, in the year 2015.

Zinc Outlook 2015: ‘Crunch Time’ is Coming

It’s been a good year for zinc market participants. While most commodities spent 2014 down in the dumps, zinc performed well, particularly during the summer, when it rose to an impressive 35-month high of $2,325.50 per tonne.

But what exactly helped zinc put on such a positive performance this past year? Here Zinc Investing News gives an overview of what happened to the base metal in 2014, then provides a look at what may be in store for it in 2015.

2014 good, but not great

This time last year there was a divide in the zinc space: while some believed the combination of major zinc mine closures and lack of new production would push the metal’s price up in 2014, others were certain the zinc price would go nowhere in 2014 — or indeed 2015 and 2016.

As the chart below shows, the bulls turned out to be correct. Though zinc’s performance wasn’t particularly exciting for the first half of the year, the summer brought some upward movement — including the 35-month high mentioned above. And while the base metal’s price has declined since then, it’s still well above where it was at the beginning of 2014.

That said, it’s worth noting that the metal’s performance was muted by the fact that zinc stocks remain fairly high. Indeed, as the chart below shows, while LME zinc warehouse stocks have sunk markedly throughout the year, they are still nothing to sneeze at.

And if the above chart isn’t enough of an eye opener, consider this: according to the International Lead and Zinc Study Group, the refined zinc metal market was actually in deficit in 2014. The organization identified a deficit at the end of 2013, and reported last month that it has stayed in place since then, with the deficit from January to September 2014 coming to a total of 309,000 tonnes. However, with stocks of the metal available it’s been hard for prices to gain too much traction.

“Crunch time” coming in 2015

Of course, the fact that zinc stocks are available now doesn’t mean they’ll continue to be. As Stefan Ioannou, mining analyst at Haywood Securities, told Zinc Investing News, while 2014 wasn’t a “breakout year” for zinc, he believes “crunch time” is coming in 2015.

Expanding, Ioannou said he sees momentum building in the zinc market during 2015 as stocks of the metal decrease and the space is further impacted by major mine closures and limited supply from new mines. He pointed to the upcoming closure of MMG’s (HKEX:MMG) Australia-based Century mine as a key point to watch — though the company said in October that it will stop producing in 2015, the timeline has bounced around.

However, he cautioned market participants to be wary of China. The Asian nation is the world’s largest zinc producer and consumer, and though it currently “imports a lot now because it isn’t profitable to produce,” a higher zinc price “will revitalize in-country production in China.” As a result, a zinc price rally could be short lived.

Execs weigh in

Responding to a Zinc Investing News survey, executives at three zinc-focused companies expressed similar views to Ioannou. For instance, Alan Taylor, COO and vice president of exploration at Canadian Zinc (TSX:CZN), commented, “we expect an increase in base metals prices as the year passes due to dropping inventories and an increasing deficit in metals,” while Chris Staargaard, president and CEO of InZinc Mining (TSXV:IZN), said, “zinc will continue to be one of the main commodity stories in 2015. As more and more people and potential investors become aware of it, it may be enough to overcome the essentially unprecedented and unwarranted collapse in investor confidence in the mining sector in the last couple of years.”

Doug Ramshaw, director at Vendetta Mining (TSXV:VTT), was a little more cautious, and noted, “I think zinc is likely going to pause for breath with some modest growth off of the new +$1 per pound foundation that appears the new benchmark for the metal.” However, he added, “I would expect the deficit in refined zinc to continue to increase, and there is no reason to think that demand won’t stay strong.”

He also offered an alternative to Ioannou’s prediction about Chinese production, noting, “looking back at a number of analyst projections on Chinese production growth, the impact of Chinese production commonly gets overestimated, and future consumption growth should more than accommodate any increase in domestic mine supply.”

Companies to watch

Ioannou’s picks for 2015 include analyst favorite Trevali Mining (TSX:TV), which already has a zinc mine in Peru and is looking to start up another in New Brunswick. He also mentioned Foran Mining (TSXV:FOM), whose McIlvenna Bay preliminary economic assessment (PEA) he described as “interesting,” and Nevsun Resources (TSX:NSU,NYSEMKT:NSU), which is currently focused on copper, but will shift toward zinc starting in 2016.

He pointed to HudBay Minerals (TSX:HBM,NYSE:HBM), Teck Resources (TSX:TCK.B,NYSE:TCK) and Lundin Mining (TSX:LUN) as well.

Meanwhile, Canadian Zinc’s Taylor said catalysts on the horizon for his company include “detailing out the Prairie Creek project to a feasbility level,” and noted that “some innovative metallurgical possibilities are presently being tested.” Similarly, Staargaard of InZinc mentioned that the projected economics outlined in the PEA for West Desert suggest that the project “more than qualifies to be advanced to the prefeasibility stage.” The company plans to “continue on that path as soon as market conditions permit.”

For his part, Ramshaw highlighted that Vendetta is currently drilling at its Australia-based Pegmont project, which he said “has an existing resource with excellent upside and is surrounded by infrastructure and mining operations” that may make potential future development low cost. He added that Canaccord Genuity recently placed the company on its Watch List 2015.

Investor takeaway

2015 looks set to be an interesting year for the zinc market, and investors would do well to keep an eye on the sector, especially given that many other commodities continue to struggle. Overall, thinking zinc looks to be a good bet heading into the new year.

Teck predicts zinc deficit on the closure of mining giants

The Vice President for Treck’s Investor Relations and Strategic Analysis,Greg Waller, stated that, the global market of the metal zinc, will soon face a deficit as the large scale zinc producers like  the Century Mine, owned by the MMG Group based in Australia, is planning on shutting down the mine after the  third quarter of this year. This procedure will most probably erase about 1.5 million tonnes of zinc produce from the global market.

Waller further added that, the metal zinc, might be seen more appealing to the investors right now. The metal has been progressed further more during the cycle. The following three years fill be filled with closure of several dominant zinc mines, from which many number of the has recently stopped their production of zinc. The market of zinc will definitely be in deficit.

He added that, the global zinc market, for  the next four years at least will have to face the lack of exploration zinc projects. Many miners in the process of hiking up the demand of zinc and also the price of the metal, has stocked up their production further increasing the deficit of the metal and making it worse. They are putting up their output until the price of zinc climbs over to 1 dollars per pound.

Zinc's premium over lead to extend decline after peak

* Zinc premium over lead hits highest in nearly 6 yrs in late Oct

* Lead may close some of price gap on winter battery demand

* Doubts emerge on scope of zinc supply/demand deficits

(Reuters) - Zinc's premium over sister metal lead is likely to continue to slip in coming months after hitting a multi-year peak as lead demand climbs during the seasonally strong winter and amid doubt over the scope of projected deficits in zinc.

Zinc's price gap over lead expanded to a high of $297 a tonne at the end of October, the strongest in nearly six years, after investors piled into the zinc market on bets that the closure of big mines would lead to deep deficits.

The rich premium of galvanising metal zinc represents a big reversal in the relationship between the two metals, which are often used as the basis for trading strategies, using either the spread or the ratio.

The premium, based on London Metal Exchange benchmark prices, has since pulled back to $226.

The extent to which investors have bought zinc and shunned lead is out of proportion to fundamentals, some analysts argue.

Both metals are typically found in the same mines so lead supplies should also be affected by mines shutting down.

"Lead is moving into structural deficit at least in tandem with zinc, and lead inventories are much lower," BNP Paribas analyst Stephen Briggs said in a note. "The discount to zinc may narrow."

Instead of a premium, a year ago zinc was at a discount to lead by about $200 with zinc weighed down by heavy surpluses.

One reason the lead price has underperformed this year is disappointing demand, partly due to weak sales of electric bicycles in China which use lead-acid batteries. Batteries account for 80 percent of global lead consumption.

That side of the equation is likely to improve in coming months since battery makers often see increased business in cold weather due to increased battery failures.

"Usually lead is seasonably stronger into the back end of the year as well as January and February, so maybe we can see some of that underperformance unwound," said Citi analyst David Wilson.

Temperatures in all 50 U.S. states hit freezing or below this week as unseasonably cold weather moved across the country.

Many bullish zinc investors base their views on big supply/demand deficits developing, but some analysts say any shortfalls may be less than expected, which could curb zinc's gains.

Analyst Jessica Fung at BMO Capital Markets pointed to two recent expansion announcements - by Vedanta Resources at a new mine in South Africa and Boliden at its Odda smelter in Norway.

"These projects...indicate there are opportunities to close the deficit gap in the next few years," she said in a note.

Global zinc market in deficit during Jan-Sep '14: ILZSG

The latest statistics published by the International Lead and Zinc Study Group (ILZSG) indicates that global refined zinc market was in deficit of 309,000 tons during the initial nine-month period in 2014.

According to ILZSG data, the zinc deficit situation in international market has surged higher significantly when compared with the total deficit of 5,000 tons during the corresponding nine-month period in 2013.

During Jan-Sep '14, global refined zinc output totaled 9.95 million tons, whereas the consumption totaled 10.26 million tons.

Earlier, the group had predicted the global zinc demand to increase by 5.1% in 2014 to 13.65 million tons. It also foresees further growth of 2.08% in 2015 to 14.05 million tons. The demand from China is expected to improve further on the backdrop of increased production of galvanized sheet. Meantime, the demand from world countries excluding China are expected to remain muted.

ILZSG also forecasts the global zinc production to grow by 1% to 13.33 million tons in 2014 and by another 3.8% in 2015 to 13.80 million tons.

Zinc gains on supply concerns, dip in dollar

* China zinc market shows signs of supply tightness

* Dollar weakens against currency basket, supports metals

 

(Reuters) - Zinc prices rose on Tuesday, supported by a strike at a Peruvian mine, concerns over expected tight supplies and a slightly weaker dollar.

 

London Metal Exchange data showed zinc inventories declined by 2,050 tonnes to 691,725 tonnes on Monday, extending two months of almost daily falls. 

 

Also, workers at Peru's Antamina mine, its largest for both zinc and copper , began an indefinite strike. 

 

Supporting metals markets, the dollar dipped against a basket of currencies, making dollar-priced copper and other metals cheaper for non-U.S. buyers.

 

"The mine supply side for zinc is going to be tight next year but more recently smelter output expectations in China have become more muted. We see zinc prices averaging above $2,300 a tonne next year," Macquarie analyst Vivienne Lloyd said.

 

Three-month LME zinc closed up 1.1 percent at $2,269 a tonne. Zinc prices are up about 10 percent this year on expectations of a deficit.

 

In China, ShFE zinc stocks fell by a fifth on Friday to five-year lows of 111,761 tonnes, while ShFE cash prices have traded at a premium against third-month prices.

 

In other metals, LME copper ended 0.5 percent firmer at $6,692 a tonne. Copper prices have fallen 10 percent this year.

 

Chile's Codelco, the world's top copper producer, has lowered its term premium by 3.6 percent to $133 a tonne for 2015 term shipments of the metal to China. The premium is in step with the Chinese spot market, where the surcharge has more than halved this year.

LME Zinc to avg $2,520 a ton in 2015: Natixis

LME zinc prices are expected to average $2,520 a ton next year and $2,725 a ton in 2016, said Natixis in a Metals Review.

As the zinc market has progressively tightened over the past year, so zinc prices have rallied from less than $1,900 a ton throughout much of 2013 to around $2,300 a ton in September this year.

Despite forecasts for modest demand growth over the coming two years, the global zinc market is expected to tighten further as supply becomes increasingly constrained, and new mines are not expected to arrive until existing inventories are dangerously close to depletion.

Against such a backdrop, Natixis would expect to see substantial upward momentum in zinc prices over the period 2015-16.

In Natixis central scenario, after averaging around $2,200 a ton in 2014, they would expect zinc prices to push up to an average of $2,520 a ton in 2015 before $2,725 a ton in 2016.

Zinc demand to outcast supply by the end of 2014, says ILZSG

According to the estimation released by the group, the demand for zinc would rise about to 13.65 metric tonnes, which is a 5.1 percent increase compared to the present situation, and will be followed by an additional increase in demand of 14.05 million metric tonnes, which is another 2.08 percent increase.

 

The anticipated increase in demand is expected from China as the production of galvanized sheet  in the country, is reported to have risen to a large extend. According to the reports from the International Lead and Zinc Study Group, the increase in global demand of zinc excluding the demand from China, is rather low, which is reported to be 2.3 percent hike in the year, 2014 and 1.3 percent hike in the year 2015.

 

The group also stated that, in Europe, 1.2  percent hike in demand is expected this year and 1 percent hike in demand is expected the year after, after remaining constant through the year of 2013.  In the year 2014, a sharp increase in the demand of zinc is expected with a raise of 8.4 percent, followed by the large scale import of zinc into the United states, even so the demand from the United States will decline in the year 2015 to 0.4 percent.

 

At the same time the production of zinc is expected to have a slight hike of 1 percent to 13.33 million metric tonnes in the year 2014, and a 3.8 percent increase in the production by 13.80 million metric tonnes, in the year 2015.

Zinc deficit to be 366,000 T in 2015 -ILZSG

The global zinc market is forecast to have a deficit of 403,000 tonnes in 2014, dipping to 366,000 tonnes next year, the International Lead and Zinc Study Group (ILZSG) said on Monday.

The group also said, following its annual meeting, that the global lead market is forecast to be in a deficit of 38,000 tonnes this year and 23,000 tonnes in 2015.

In zinc, global demand for refined metal is expected to rise by 5.1 percent to 13.65 million tonnes this year and a further 2.9 percent to 14.05 million tonnes in 2015, the ILZSG said.

"These rises will be primarily driven by increased Chinese usage," it said in a statement.

Refined zinc metal output is forecast to rise by 2.9 percent to 13.25 million tonnes in 2014 and by 3.3 percent to 13.68 million tonnes in 2015 mainly due to further expansion of output in China, it added.

In lead, global demand for refined lead metal is forecast to increase by 1.4 percent to 11.33 million tonnes this year and by

2.1 percent to 11.56 million tonnes in 2015, the group said.

Growth in Chinese lead demand is due to slow this year.

"This is mainly due to a slowing of the increase of output of e-bikes that account for a significant portion of Chinese automotive lead-acid battery sales," it said.

World production of refined lead metal is forecast to edge up by 1.5 percent to 11.29 million tonnes in 2014 and rise by 2.2 percent to 11.54 million tonnes in 2015.

Will Zinc Price Rally in October?

Zinc price in China’s domestic market is expected to trend higher in October, an analyst from Shanghai CIFCO Futures predicts in a most recent SMM’s interview. 

Orders at Chinese galvanizers and zinc oxide producers usually grow in Q4, and this will boost demand for zinc ingot, the analyst told SMM. 

“Physical supply is tight now, with spot premiums in east China’s zinc market as high as 200 yuan per tonne”, he said.  

Concern over supply disruptions of zinc ore will continue to lure investors into zinc market, he added. 

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China’s zinc exports reached a –year high in August, and most exports went to LME-registered warehouses, Shanghai Metals Market learns.
  

China exported 21,200 tonnes of refined zinc in August, up 28-fold YoY, bringing net imports only 37,000 tonnes, according to China Customs.

  

Growing pressures in bonded-zone inventories, Qingdao’s financing fraud, high storage charges and cash flow problems all promoted export activities since June, especially in bonded zones, SMM understands.

China Zinc Exports Hit 6-Year High in August

 China’s zinc exports reached a –year high in August, and most exports went to LME-registered warehouses, Shanghai Metals Market learns.   

China exported 21,200 tonnes of refined zinc in August, up 28-fold YoY, bringing net imports only 37,000 tonnes, according to China Customs.  

Growing pressures in bonded-zone inventories, Qingdao’s financing fraud, high storage charges and cash flow problems all promoted export activities since June, especially in bonded zones.

The SHFE/LME zinc price ratio dropped to 7.1-7.2 June-August, holding losses for imports above 1,000 Yuan/tons, preventing goods in bonded zones from entering domestic market. 

Over the past few months, major export destinations of Chinese zinc products were Taiwan (China), Malaysia, Singapore and South Korea, and all these regions have LME-approved warehouses.

Besides, LME zinc inventories have grown from 700,000 tons to 750,000 tons since June. Hence, SMM estimates that most exports went to LME-approved warehouses in Asia. 

Outbound shipments of Chinese zinc products are expected to remain high in the near future due to the current price ratio and liquidity conditions.

Positive Zinc Outlook Not Necessarily a Sure Thing

Zinc market participants have likely grown used to hearing positive predictions about the metal, but in a recent article Mineweb's Kip Keen takes a look at the flip side of the coin.

As quoted in the market news:

"For a zinc refresher I called up Jessica Fung, a BMO mining analyst with a head for base metals, to talk about her more conservative view of the zinc sector.

Let's dig into some of her research.

First zinc consumption. It will come as no surprise that China consumes a lot of the world's zinc. Of total consumption last year China gobbled up about 46 percent, or 6,063 kt.

But, and this is one of the key considerations, China, unlike in the case of say copper , produces a huge amount of its own zinc. Zinc mine supply in China back in 2000 accounted for about 20% of global mine supply. Now it accounts for about 37%, which underscores massive mine supply growth over the past decade and near-half in which it demand also soared.

Fung is of the mind that this will continue, with potential for consolidation in the zinc mining sector in China and, as she puts it, economies of scale to be realized.

Click here to read the full Mineweb report.

Mine closures – a boon for zinc

Zinc prices seen rising as some of the mines run dry amidst spurt in demand

Zinc is used principally for galvanising iron and more than 50 per cent of metallic zinc goes into galvanising steel.

Zinc is the primary metal used in making American pennies and rising prices of this bluish-white metal this year have forced the US Mint to reduce manufacturing costs to offset higher prices.

Zinc prices have soared to three-year highs in 2014 on intensifying deficit in the global market as one of the biggest mines, Century open pit in Australia, is due for closure next year and the delayed start of its Dugald River project. MMG’s Century mine is expected to run dry in 2015, removing about 5 per cent of global supply.

Several large, aging mines are also scheduled to close next year as miners need higher prices to justify the cost of finding and developing new sources of metal. Miners may not produce enough zinc to meet the needs of steel companies and coin-makers until 2018. Owing to this, zinc production is expected to fall short of demand this year for the first time since 2007.

According to the Lisbon-based International Lead and Zinc Study Group, zinc demand is up 7.7 per cent globally in the first six months of this year to 6.8 million tonnes. As a result, users are drawing on stockpiles of the metal to make up for production shortfalls.

Supplies of the metal in LME-licensed warehouses fell to a three-and-a half- year-low in July, and are down 15 per cent this year. The warehouses contain enough zinc to meet 19 days of demand, down from 24 days at the start of the year.

Chinese factor

Moreover, China’s MMG Ltd, owner of the world’s third-biggest zinc mine, said the global deficit in the metal had increased faster than expected, spurred partly by demand growth in China to rust-proof steel for cars. Chinese demand had picked up as companies sought galvanising technology, following a push by the International Zinc Association to tout the benefits of coating steel with zinc to prevent rust.

As a result of this, Chinese imports of refined zinc have jumped by 39.3 per cent through July, given the solid underlying demand growth, up about 7 per cent in 2014, boosted by strong auto production (+9.4 per cent year to date), rising content of galvanised steel in cars to prevent rust.

After a surplus of six years, supplies of the metal would be in deficit this year, coinciding with world major economies struggling for a breakout from recession, propelled by forecasts of annual demand growth of five-six per cent.

The Zinc study group has estimated that demand for zinc exceeded output by 248,000 tonnes in 2014 through July’14, compared with a 15,000-tonne production surplus in the same period a year earlier.

Prices to rise

Strong demand growth at a time when a number of big mines are approaching the end of their lives will lead to increase in physical deficit and a rundown in stocks at registered LME and Shanghai warehouses, thereby boosting prices further.

For the coming months, prices will continue to surge as some of the world’s largest zinc mines run dry just amidst spurt in demand.

In addition, MMG Ltd, which owns Century, had planned to open a new mine in Australia next year, but it’s being delayed back to late 2016 due to technical issues. This will fuel supply concerns.

However, higher shipments from China, the world's top consumer and producer of refined zinc, in the fourth quarter as tight credit crimps domestic demand at a time of increased imports to LME warehouses in Asia could cap LME zinc prices, which gained around eight per cent this year.

LME Zinc (CMP: $2,222) prices can head higher towards $2,500/tonne, while zinc on the MCX (₹135.5) can head higher towards ₹152/kg.

US Mint screws up with the rise in zinc price

The price value of zinc exceeded the highest value point; which was in the year 2009, in the first better half of this year. The main reason behind this unexpected rise in the metal is stated to be the increase of global demand over the global production. The squeeze further tightens as the US Mint boosts its production to 7.5 billion pennies this year, which is a 14 percent increase and will require more than 18,000 metric tons of zinc for the production.

Zinc has grown to become an essential element in our day to day life, and is being used in manufacturing most of the commodities starting from coins to sunscreen, where as in the US economy, the price of this metal is climbing up. The new production of the metal is at the  moment is not possible as many of the old mines have been shut down and hence the global manufacturing gains momentum. All the plannings of US Mint to cut the cost of production by increasing productivity, has been shattered by the rise in the zinc price, a former director of  the US Mint, Philip Diehl.

Diehl also stated that, even though the Mint could be made efficient, it could only get that far, the officials have come to the maximum limit as they could. He further stated that, as long as the price of raw material continues to go up nothing could be done to decrease the production cost.

The price of zinc has risen up to 2,265 dollars per ton this year in the London Metal exchange, whereas the global demand for zinc has increased to 248,000 tons.