thus with a kiss I die

Zinc: Demand to outstrip supply in 2016 (from IKN364)

Think Zinc, baby. Think zinc.

A small section of IKN364, out last night. One small edit made, the name of the company we’re buying to take advantage of the bright future in zinc.


Demand to outstrip supply in 2016

Yes, shameful but it’s true, your
author is going all zinc-pumpy on you after sneering at the “it’s gonna happen
anytime now folks!” perma-pumping of the sellside in zinc for years. This “Get
On Zinc Before It Flies!!!” is a narrative (with obligatory three exclamation
marks) that’s been sold to us for years, but this time it really seems to have
some fundamentals to back up the wishful thinking and that was underscored last
week by the International Lead and Zinc Study Group
(ILZSG) saying this in its latest update, dated April 28th 2016 (29):

“Information recently collected from ILZSG
member countries indicates that global demand for refined zinc metal will
exceed supply by 352kt in 2016. This deficit is higher than that indicated by
the Group during its meetings last October with the difference due primarily to
additional cutbacks in mine production announced over the past six months.”

The combination of higher expected
demand in China (+4.5%) as well as in other consumer countries, plus the
closure of another raft of mines, has altered the supply/demand balance
significantly and here is a chart of how the current 2016 forecasts
compare to previous years.

The result is record demand, only
slight increase in supply, and the only recent year with a comparable deficit
of total production (mine production is most but not all of the Zn supply to
market) is 2011 (the last year that zinc both went above and stayed above
U$1.00/lb for longer than just a quick spike). But that’s not all, because when
you comb through the details of the ILZSG report we also read that further
supply crimps are in the cards. To quote the bulletin, “…taking into account the predicted decrease in zinc mine
supply, zinc metal production expectations in some countries may be subject to
downward revisions later in the year”.

Overall, a bullish
price scenario right at a time when commodity prices across the board are
rallying. The type of oversupply in the copper market is not happening here.
That’s another reason to like (name removed) in the weeks to come.

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