Goldman’s ‘Bullish Exception’ Powers Ahead as Zinc Tops $2,000

  • Nyrstar and other zinc producers get boost from price rally
  • Prices at 10-month high on outlook for worldwide shortage

Zinc extended its rally to a 10-month high amid expectations for a global shortage of one of this year’s best-performing commodities.

Zinc, used for rustproofing steel in everything from auto bodies to suspension bridges, has surged 23 percent in 2016, outperforming other base metals. Banks from Goldman Sachs Group Inc. to Macquarie Group Ltd. see further gains for prices that have risen for six straight days. Zinc deficits could even send prices to a record in the next two years, ICBC Standard Bank Plc said in March. The metal peaked at $4,580 a metric ton in 2006.

Glencore Plc and Nyrstar NV, Europe’s top refined metal producer, curbed output from mines last year after prices plunged amid the worst rout since the global financial crisis in 2008. Operations such as Vedanta Resources Plc’s Lisheen in Ireland and MMG Ltd.’s Century in Australia have also closed. Goldman last month dubbed zinc the “bullish exception” among metals, highlighting its positive prospects in contrast to the outlook for copper and aluminum.

“Zinc has a strong uptrend behind it,” Andrew Silver, a broker at Triland Metals Ltd., said by phone. “Prices are moving in advance of tighter fundamentals. Some of the fund money has come toward zinc. If demand holds up, the physical surplus will get eaten away.”

Producers Rise

Zinc for delivery in three months climbed as much as 1.7 percent to $2,004 a ton before settling at $1,982 at 5:51 p.m. on the London Metal Exchange. Prices rose for sixth straight session, the longest run since March.

Nyrstar climbed 4.6 percent in Brussels. Boliden AB also rose in Stockholm.

Miners are supplying less of the ore concentrate that’s refined to produce zinc just as demand rebounds in China, the biggest user. Chinese smelters that churn out more than 40 percent of the world’s zinc may cut production for the first time in four years because they can’t get enough raw material.

“Fresh investment capital is pouring into zinc amidst conjecture of further Chinese production cuts,” Michael Turek, the head of base metals at BGC Partners Inc. in New York, said in an e-mail.

Zinc stockpiles in LME-tracked warehouses have shrunk 18 percent this year to the lowest since 2009, bourse data show. Goldman predicted a global deficit of 114,000 tons in 2016, widening to 360,000 tons in 2017.

In other metals:

  • Lead, which is mined together with zinc, climbed for a fifth session on the LME.
  • Aluminum, copper and nickel declined, while tin rose.
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