Zinc outlook 1 Apr 2015 19:37
Strange all the messages are gone.. anyway hope people are taking positions in GFM, heading for 40-50p range in the next couple of months
Zinc could finish 2015 strong, says Stefan Ioannou, mining analyst with Haywood Securities.
He estimates that over the previous two years about 12% of global zinc production ceased and more will end soon, ultimately leading to a run in the zinc price in late 2015 and into 2016.
The zinc market is an interesting space. Current inventories are still quite high, but they're being drawn down rather quickly. We have seen and are in the process of seeing large zinc mines shut down.
Over the last two years or so we've lost about 12% of world production and the advanced-stage projects slated to replace those mines are quite few—not enough to replace what we're losing. We are anticipating a move in the zinc price, probably later this year. Then in 2016 and 2017 we could see zinc prices really run, as in 2007, when zinc rose to $2/lb. Any company with zinc in its name or zinc in its business plan stands to do well. Looking further ahead we anticipate higher pricing will prompt more production, in turn moderating the market. Hence, we continue to use a long-term zinc price of $1.15/lb.
The list of projects to replace those mines is almost nonexistent. The market is definitely shaping up for a swing from surplus to deficit. The exact timing remains to be seen, but most estimates are showing the actual inventory pinch point hitting as early as the beginning of 2016.
My guess is that market anticipation will prompt equities to move sooner than that, probably in the second half of this year. At that point we could be off to the races on the zinc price. Keep in mind, however, that mining is a cyclical business and if we do see higher prices it's going to prompt new production, namely out of China. Nevertheless, the zinc story appears to be shaping up to be a potentially interesting trade to keep in mind.
http://www.mining.com/web/stefan-ioannou-bottom-fishing-opportunities-in-base-metals-especially-zinc/