You Won’t Believe Which Metal Is At a High

In late October, I wrote about bullish signs starting to materialize for zinc.

At the time, the metal seemed like a tough commodity to get excited about. Prices had been largely flat since 2011–with the metal languishing near a four-year low at $0.85 per pound.

But news last week shows what a difference a few months can make.

Today, zinc is a rising star. As I write, the metal is approaching $0.97 per pound. Making for 15% gains so far since the beginning of December.

In fact, demand for prompt-delivery zinc is soaring. With reports on the London Metal Exchange (LME) showing that premiums for spot zinc have risen to their highest level in over six years against futures prices.

That means there’s growing demand from consumers and investors globally to secure immediately -available zinc supplies. Reports suggest that up to 60% of LME zinc inventories may be tied up by financing arrangements–and thus unavailable to new buyers.

Amid this climate, traders report that zinc stockpiles are falling fast. So far this year, LME inventories are down 18%.

In short, this market has seen a big change in sentiment and trading. In a very short time.

It’s possible that some of the action is just born-again commodities investors rotating into the next hot play. But there are some important fundamental factors providing a tailwind for zinc.

Mine closures being the largest one. Last week significant producer Australian MMG noted that its Century zinc mine in Queensland will shut down much earlier than expected.

The Century mine had originally been slated to close in 2016. But MMG’s chief executive Andrew Michelmore told a meeting of the International Zinc Association that the timeline is now compressed–with Century expected to idle between June and September 2015.

That news may have helped light a fire under zinc trading the last few weeks. Such bullish sentiment doesn’t look like it will cease anytime soon.

Here’s to the dark horses,

Dave Forest

dforest@piercepoints.com / @piercepoints / Facebook

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