A Bold Prediction For One Base Metal

I usually take forecasts with a big grain of salt.

Especially when it comes to commodity prices. With the experience being that accurately predicting movements in these markets for the short to medium term is nearly impossible.

But one forward-looking analysis this week deserves a mention. Both because of the experts who made the prediction–and the unusual angle these professionals took in examining one of the biggest metals markets globally.

The group is CRU. A leading specialist in tracking commodity prices and trends.

And the metal is zinc. Which this group sees as having a bright future ahead.

CRU analysts told the International Zinc conference in Dubai that this commodity may have some of the biggest upside going. With the group predicting that zinc prices could rise as high as $4,500 per tonne ($2.04 per pound) over the next five years.

That would be a big jump, considering zinc today is going for just over $2,000 per tonne.

More interesting than the scale of the predicted rise is the reason. Which has to do with growing demand in an unexpected part of the world: Asia, outside of China.

CRU professionals noted they expect ex-China zinc demand in Asia to grow significantly. To the point where the combined nations of this region will actually pass China as the largest consuming region in the world.

That prediction is a first, as far as I’m aware. And could have some important implications for this market.

Mainly in terms of sourcing supply. China is currently the only Asian nation that produces significant zinc output–almost all of which gets used domestically.

If Asian end users do start ramping up demand, they’re going to have to reach out to find supply. To places like Australia and perhaps even as far as Peru and the U.S.

This could be a big boost to mining projects in these regions (with Chinese consumers already becoming active in places like Peru). Perhaps more importantly, rising Asian demand could spur a wave of zinc exploration and development in the region itself. With focus shifting to nations like Myanmar and Mongolia.

We’ll see if the numbers pan out. The bull case for zinc seems to be growing stronger by the day.

Here’s to the other Asia,

Dave Forest

dforest@piercepoints.com / @piercepoints / Facebook

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