Despite a slump in the previous quarter, zinc prices are projected to maintain stability for the remainder of the year. This outlook is bolstered by encouraging signs, such as a surge in cancelled warrants on the London Metal Exchange (LME) and a potential upswing in Chinese demand.
Factors Behind the Fluctuations
Zinc prices witnessed a decline, dropping to $2,500 a tonne from an average of about $3,100 a tonne in preceding quarters. This dip was attributed to concerns over shortages in zinc refining capacity. Presently, the LME zinc spot price hovers around $2,601.
While the metal saw a price dip in the September quarter due to lackluster Chinese demand and the nation’s ongoing property crisis, current trends suggest a potential revival. This optimism is rooted in anticipated recovery in the Chinese economy and expectations of reduced production in Europe and Australia.
Inventory and Production Insights
There’s been a notable surge in LME zinc stockpiles recently, indicating a possible shift in market dynamics. Dutch firm ING’s analytical wing, ING Think, reported a significant rise in cancelled warrants at LME warehouses, signaling growing demand.
On the global front, zinc mine production experienced drops in several countries like Canada and Australia, but gains in nations like Brazil and Kazakhstan balanced out these declines, resulting in a net global reduction of 0.7%.
The Long-Term Perspective
Research agency BMI maintains a cautious stance on the future of zinc prices, forecasting an average price of $2,150/tonne over 2024-27. The Australian Office of the Chief Economist also expects subdued zinc demand growth, predicting average prices of $2,500 in 2024 and $2,600 in 2025.