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As zinc consumption reaches record levels and inventories decline, prices may shoot by as much as 27% by next year marking the start of a bull market

13 Oct 2011

NEW YORK (Commodity Online): As zinc consumption reaches record levels and inventories decline, prices may shoot by as much as 27% by next year marking the start of a bull market.

LME zinc is currently trading above $1800/tonne and prices could climb 27% to $2450/tonne within next year, a Bloomberg survey of analysts, traders and producers show.

Production of rust-proof steel, which accounts for 50% of zinc consumption, hit an all time high of 31.7 million metric tonnes in Q2, Macquire Group estimates.

Even though zinc markets are in surplus, Morgan Stanley expects the surplus to narrow and turn into a shortage by as early as 2014. Production surplus will fall from 270,000 tonnes in 2011 to 130,000 tonnes in 2012.

Zinc market has been in surplus for the past years as global mine production have increased. With no major reserves being planned to be added, the supply issue could become a major problem in the next few years.


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