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Zinc

Zinc (Zn), zinc chemical element, a low-melting metal of Group 12 (IIb, or zinc group) of the periodic table, that is essential to life and is one of the most widely used metals. Zinc is of considerable commercial importance.

Occurrence, uses, and properties

A little more abundant than copper, zinc makes up an average of 65 grams (2.3 ounces) of every ton of Earth’s crust. The chief zinc mineral is the sulfide sphalerite (zinc blende), which, together with its oxidation products smithsonite and hemimorphite, constitute nearly all of the world’s zinc ore. Native zinc has been reported from AustraliaNew Zealand, and the United States, and the leading early 21st-century producers of zinc are ChinaAustralia and Peru.

Supply and Demand

Zinc had a strong supply/demand story for most of 2014 and 2015. Despite this, the zinc price kept falling until multi year lows of about $0.70/kg in December 2015. Those fundamentals revolved around the impending closure of two large zinc mines, the Century mine owned by MMG, and the Lisheen  mine, owned by Vedanta Resources, together accounting for 675,000 tonnes of annual zinc production. As both mines did close in 2015, and on top of that giants like Glencore planned to remove 500,000 tonnes of zinc production from the market, and Belgian zinc force Nyrstar contemplated to do the same for 400,000 tonnes soon (and even thinks about divesting some or all their zinc mines in 2016), one would have expected some kind of upward pressure to the zinc price.

This didn’t happen unfortunately for resource investors. There are a few reasons, although none of them isn’t very convincing as each of them represents at most a temporary influence, or is around for a long time. The temporary one is the dumping of zinc by Glencore, rising LME zinc stocks in the process this summer. The longer term downward catalysts can be found in a strong US dollar, lagging Chinese demand, and overall weak global economic sentiment, despite the Fed using an upbeat rhetoric in order to raise rates for the first time in years in December 2015. I don’t expect these last three catalysts to change meaningfully, however it could be that supply diminishes so much in 2016 that this actually outweighs the current downforce on the zinc price after H1 2016.

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