Are the Zinc Optimists Right?

This week’s Mining Journal (VIEW LINK) may be worthwhile reading for anyone interested in the outlook for the zinc market. It’s advertised as offering an insight into whether the zinc market optimists are right. The zinc bulls are saying price prospects for zinc, of all the main metals, are the rosiest. This leaves aside whether the price of one metal can buck the macro trends to deviate from the pack for a prolonged period. Most forecasters are also forgetting the role of the exchange rate highlighted in my wire last week (VIEW LINK). That throws cold water on zinc prices rising while the US dollar is also rising. Thirdly, optimism rests on continuing strong usage growth. The International Lead Zinc Study Group data for the first four months of 2015 (published on Wednesday) point to usage growth of 1.8% this year compared to growth of 4-5% in the preceding two years. Currently slower growth places a heavier burden on growth in future years to achieve the cut back in inventories necessary to push prices higher.