Categories:
Base Metals
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General Market Commentary
Topics:
General Base Metals
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General Market Commentary
Zinc Supply Crunch Hides in Shadow of Trade War
Zinc has so far been the hardest hit of all the base metals in 2018, with its value down over 32 percent year-to-date, even as global stockpiles in London fall towards the 200,000-tonne mark.
As of Monday (September 17), zinc was trading at US$2,285 a tonne — well down from its starting point in 2018 when it sat at the (comparatively) lofty height of US$3,375.
Cormark Securities mining analyst Stefan Ioannou told the Investing News Network that when it comes to commodities, thanks to the trade war there is a ‘call me when things get better’ attitude in the markets. “They’re all trading down, copper being just as notable,” said Ioannou.
“A lot of that stems back to … the trade war narrative we’re hearing about between the US and China, and the US and other groups, [and the] concern that has created with regards with near- to medium-term demand,” Ioannou explained.
“That’s had a huge impact on prices — prices were actually rallying going into the early summer, and that’s when the trade war narrative really picked up. It’s spooked the general investor for sure.”
Copper is down over 19 percent down year-to-date, as is lead. While nickel is almost unscathed compared to the others at US$12,230 a tonne — down 3.54 percent as of Monday’s LME prices.
“I think you could argue to a certain extent that zinc had quite a good run early — so if anything it may have got a bit ahead of itself,” said Ioannou.
Chart via the London Metal Exchange.
“That’s not to say I don’t think the medium-term outlook for zinc is still very strong. I think we hit a high of $1.60 [around US$3,600 a tonne] or so — I don’t think that was a ceiling, but I think we hit $1.50 sooner than people expected, and so the correction was that much more severe with the trade war.”
Ioannou said that when it comes to the zinc story and what is affecting the metal’s price besides the trade war, it is really all on the supply side of the equation.