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Zinc entered 2014 with some of the best fundamentals among the base metals. Exchange stockpiles declined by 380,000 tonnes last year, reflecting both an improvement in demand for zinc as well as constrained supply.

01 Apr 2014

LONDON (Commodity Online): Zinc prices will average $2,185 per ton in 2014, rising to $2,450 per ton in 2015 as the market progressively acts to ration near-term demand for the metal, as well as incentivising mining companies to increase investment in new mines over the coming years.

Zinc entered 2014 with some of the best fundamentals among the base metals. Exchange stockpiles declined by 380,000 tonnes last year, reflecting both an improvement in demand for zinc as well as constrained supply. International miners are struggling to raise zinc output against a backdrop of investment cutbacks and zinc mine closures. Accumulated stocks of zinc ore are likely to have diminished over the course of 2013, restricting smelters’ flexibility to raise refined zinc output. If demand for zinc continues to grow at its recent robust pace, the market should tighten further over the course of 2014-15.

Our forecasts for demand and supply anticipate that the global zinc market will move into a steadily widening deficit, which will generate real concerns about physical scarcity of metal over the course of 2014-15. This view is reinforced by the sharp drop in reported zinc inventories in 2013 as well as the rise in physical premiums for delivery of zinc and a switch in the LME zinc forward curve from contango to backwardation late last year. All of these indicators clearly point towards higher zinc prices.


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