Zinc Advances to Two-Month High as Mining Cuts Spur Deficit View

  • Production seen trailing output by 152,000 tons in 2016: ILZSG
  • Outlook for tigher supply points to higher prices: Commerzbank

Are Metals and Mining Prices a 'Golden Opportunity'?

Zinc climbed to the highest in two months on prospects for a supply deficit next year as mining companies cut output.

Production will trail demand by 152,000 metric tons in 2016, as reductions in mine supply outside of China slow output growth, the International Lead and Zinc Study Group said in an e-mailed statement Friday. The estimate was prepared before Glencore Plc announced it would trim annual zinc output by 500,000 tons. In China, the largest user of industrial metals, equities rallied to the highest in seven weeks amid speculation that the government will take more steps to bolster economic growth.

“The global zinc market is likely to be considerably tighter next year than the ILZSG’s data suggests,” Commerzbank AG analysts including Daniel Briesemann said in a report. “This points to higher zinc prices in the medium to long term.”

Zinc for delivery in three months rose 0.4 percent to settle at $1,843 a metric ton at 5:51 p.m. on the London Metal Exchange, after reaching $1,881.50 a ton, the highest since Aug. 11. Copper, lead and nickel also gained in London, while tin and aluminum fell. 

Goldman Sachs Group Inc. expects zinc prices to rally in the near term following the Glencore cuts. Still, the bank said “it is likely prudent to wait for a major tightening in the zinc mine supply before becoming bullish on the refined zinc market.”

On the Comex in New York, copper futures for December delivery increased 0.1 percent to close at $2.4155 a pound.

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