Is This Really the Next Metal to Have a Run?

Interesting theory floated by expert commodity analysts Wood Mackenzie last week.

Speaking in London, the group’s metals chairman Richard Wilson said that zinc will be the next big story in metals. Wilson was enthusiastic, calling zinc the “rising star of the base metals market going forward.”

Explaining his bullishness, he noted that zinc’s rise may be due to the fall of gold and silver. He theorized that falling precious metals prices may lead to closures at mines that produce zinc as a by-product. Especially in places like South America.

This sounds like a viable theory. The fates of some metals have indeed historically been tied to the prices of others. Molybdenum output for example, can vary with copper production at some of the world’s mines.

But the numbers to date don’t show lower gold and silver prices denting zinc output much. Yet.

In South America’s largest zinc-producing nation Peru, output of zinc concentrate from June to August totalled 349,886 tonnes. Up almost 4% from the 336,779 tonnes produced in the same period of 2012, when silver prices were much higher.

Peru’s zinc output did drop in August (the most recent month for which the government has reported data), by 5% year-on-year. But the fall doesn’t appear related to a price-driven decline in precious metals output. Peruvian gold production jumped almost 13% in August, year-on-year. Silver output was up 6% on the month.

None of those numbers suggest an impending production slash for zinc. We’ll see if any emergence of Wood Mac’s call appears in the data going forward.

Here’s to the next big story,

Dave Forest

dforest@piercepoints.com / @piercepoints / Facebook

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