Zinc Caps Best Quarter Since ’10 on Deficit, Stimulus Outlookby
Zinc gains 16 percent the last three months as deficits mount
Metal helped amid bets that central banks will shore up growth
Zinc capped its best quarter since 2010 amid forecasts for supply deficits and speculation that central banks will move to buttress the world economy after Britain’s vote to leave the European Union.
Mine-supply growth is faltering and demand improving, according to Morgan Stanley, helping boost prices 16 percent this quarter. Output of zinc, used to rust-proof steel, will trail use by 144,000 metric tons, and will remain in deficit until at least 2020, analysts at RBC Capital Markets said. Equity and commodity markets gained this week on bets that central banks will act to stem fallout from the Brexit vote.
“Zinc in particular probably has the best supply-and-demand dynamics and fundamentals of the base metals,” Mike Dragosits, a senior commodity strategist at TD Securities in Toronto, said in a telephone interview. “We’re just getting tighter and tighter situations, and that’s helped zinc prices outperform.”
Zinc for delivery in three months gained 0.8 percent to settle at $2,104.50 a ton at 5:50 p.m. on the London Metal Exchange, after touching $2,116, the highest since mid-July.
The shuttering of two of the world’s biggest mines, China’s MMG Ltd. Century mine and Vedanta Resources Plc’s Lisheen mine, is helping push the zinc market into deficit.
Bank of England Governor Mark Carney said policy makers will probably have to loosen policy within months to deal with the impact of the Brexit vote, and Japanese central bank chief Haruhiko Kuroda said this week that more funds could be injected into markets should they be required.
“Base metals are rising along with other risk assets such as iron and steel on stimulus expectations,” Li Li, an analyst with Jinrui Futures Ltd., said by phone from Shenzhen. “Fundamentals haven’t changed significantly.”
In other metals:
- Copper futures for September delivery rose 0.4 percent to $2.1955 a pound on the Comex in New York.
- Copper, aluminum, nickel and lead gained in London, while tin dropped.