Shrinking supplies seems to overcome gravity of slowing base metals demand
Caught between an updraft caused by dwindling supply and the gravity of slowing growth in global demand, zinc prices seem to have reached a cruising altitude above US$1 per pound.
Recent closures of two large zinc mines – Century in Australia and Lisheen in Ireland – wiped out more than 600,000 metric tons of the world’s annual supply of the galvanizing metal.
Analysts expected these looming supply deficits to send zinc prices soaring well above US$1/lb. in 2015. While the metal did climb to US$1.10/lb. in May, lackluster global economic growth muting the demand for commodities in general instead dragged the price to seven-year lows.
With zinc prices falling below US70 cents/lb. late in 2015, Glencore PLC slowed its output, removing another 500,000 metric tons from the global supply.
“The main reason for the reduction is to preserve the value of Glencore’s reserves in the ground at a time of low zinc and lead prices, which do not correctly value the scarce nature of our resources,” the Switzerland-based company explained.
In the July 26 edition of its commodity prices index, Scotiabank said the 8 percent drop in zinc supply resulting from the two large mine closures and Glencore’s curtailment sets zinc apart from its contemporaries.
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