Here comes zinc?
Published 17-JUN-2016 12:19 P.M.
|
2 minute read
Hey! Looks like you have stumbled on the section of our website where we have archived articles from our old business model.
In 2019 the original founding team returned to run Next Investors, we changed our business model to only write about stocks we carefully research and are invested in for the long term.
The below articles were written under our previous business model. We have kept these articles online here for your reference.
Our new mission is to build a high performing ASX micro cap investment portfolio and share our research, analysis and investment strategy with our readers.
Click Here to View Latest Articles
Zinc is emerging as one of the 2016 success stories for base metals as last year’s hangover becomes this year’s gain.
Last year was somewhat of a downer for the zinc market – with miners shutting down production left, right, and centre.
Vedanta Resources shut down its Lisheen miner in Ireland, and MMG Limited (ASX:MMG) shut down its Century Mine in Queensland because supply had been exhausted.
Meanwhile largest zinc producer in the world Nyrstar said it would suspend its operations in the US while Glencore to 500,000 tonnes of zinc concentrate off the market – all in one way or another responses to a falling zinc price.
The price of zinc went down about 30% last year on the back of the decisions.
The standard cautions about past price not influencing future performance applies here – but the drop in 2015 is writ large here.
All that lost production last year is starting to show up in the price of zinc this year, and according to recent reports from Bloomberg the Chinese smelters which produce more than 40% of the world’s final product zinc may have to cut production for the first time in four years.
As this breakdown from MMG – a major zinc producer, shows, when China is having difficulty it’s a pretty good analogue for the broader market.
In May, Goldman Sachs analysts issued a note saying that is saw zinc as the exception in the base metals space rather than the rule.
“We view zinc as the bullish exception in the metals space, and remain very bearish on the outlook for the other base metals prices, most notably copper and aluminium, where we see very strong supply growth” in the second half, the analysts were quoted by Bloomberg as saying.
“Zinc has by far the most bullish supply-side dynamic.”
It spells good news for zinc hopefuls such as locally listed Consolidated Zinc (ASX:CZL), which is currently hard at work in Mexico attempting to produce zinc onto the market in 2017.
There’s no guarantee that CZL will be able to pull off the feat or prices will continue to rise in that time – but the price rise of this year will be a fillip to the company, especially as it winds up to a maiden JORC resource in the near-term.
It would appear that zinc is on a bullish course, at least for the rest of 2017 – but whether new supply comes on or demand drops for zinc in 2017 is too far out to forecast.
In the shorter term though, stocks that are in zinc could see pricing support as the underlying commodity price continues to heat up.
General Information Only
S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.
Conflicts of Interest Notice
S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.
Publication Notice and Disclaimer
The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.
Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.
This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.