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Dave Forest

Dave Forest

Dave is Managing Geologist of the Pierce Points Daily E-Letter.

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This Crucial Commodity Continues To Rally

Zinc

Zinc has been one of the best performers amongst commodities the past year. With the metal rising over 90 percent since early 2016, to a current $1.33/lb. 

And news this week from one of the world’s biggest zinc consumers shows the rally may still have legs. 

That’s China. Where data showed that demand for zinc concentrates is rising fast.

Platts reported that Chinese imports of zinc concentrate jumped 31 percent in the first half of 2017, as compared to the same period of 2016. With total incoming shipments reaching 1.3 million tonnes. 

That big leap reportedly came as domestic zinc production across China has been stagnating. With the news service quoting Chinese miners as saying that strict environmental checks in key zinc province Hunan have crimped local output. 

Sources also said that mines in China’s Inner Mongolia region are seeing decreasing ore grades. And that heavy rains in Yunnan province have also reduced output. 

All of those declines in local supply reportedly have Chinese zinc refiners desperate for concentrate supply. With traders saying that many buyers have launched negotiations this month with overseas suppliers for concentrate imports — well ahead of the usual negotiation period, which typically takes place in September and October. 

The rising demand is also being seen in treatment charges at Chinese zinc refineries. With spot TCs reportedly falling to between $50 and $60 per tonne this month — down from $55 to $60 in July.  Related: Tech Guru Unveils New Battery To Challenge Lithium-Ion

These are the prices charged by refiners to miners for processing — so the lower the rate, the more desperate buyers are for supply. And traders told Platts that overseas zinc sellers are currently offering supply at the low end of this range — around $50/tonne. Suggesting that zinc is firmly in a seller’s market. 

If deals do get done in that range, it shows that things are tighter than ever in global zinc supply, suggesting that the rally in prices could continue. Watch for more stats on Chinese imports, and quotes on treatment charges to gauge the state of the market. 

Here’s to things getting tight.

By Dave Forest

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