MUMBAI/LONDON (Commodity Online): Zinc prices have mostly remained stable in recent months and one of the main reasons may be the availability of sufficient supply in the market.
Even though supply has been tightening, Barclays believes that the situation is just temporary as more inventory builds are expected later in the year.
“Even assuming robust metal demand growth of over 5% in 2012, we do not see metal tightness emerging until 2013”, the Barclay’s report says.
Even though Zinc demand has slowed in China due to a supply of galvanized steel, public construction in the near future should fuel robust consumption in Zinc. China had earlier outlined plans for building large scale affordable public housing units.
At the London Metal Exchange (LME), zinc has fallen from approximately $2500 to around $2200 till this year and has mostly been trading in a range of $2100-$2200.
At the Multi-Commodity Exchange of India (MCX), Zinc fell from Rs 110 to Rs 90 during early august due to macroeconomic concerns but is trading above $100 as of Friday.
As of now, there are no supply concerns in the Zinc market with production growth coming from Russia, Iran, Finland and China. “We believe this will be more than sufficient to meet refined metal demand growth in the next 12 months”
However, a supply crunch is coming, the report warns. And this will stem from three main causes-mine closures, steep decline in ore grades and a decrease in Chinese production growth. But this supply crunch is not expected to happen till 2013-2014.
