Why Zinc Prices May Not Rise

John Robertson


Expectations of zinc experiencing a prolonged period of deficits and high prices hang on a critical assumption about the pattern of growth. An assumption of average growth outcomes over the coming five years suggests continuing inventory declines and rapidly rising prices. If, on the other hand, there was no zinc consumption increase in 2015 before growth rises to 5% over the subsequent five years, the industry could still replicate its average post-1990 growth outcome but inventories would remain higher than they were at the end of 2014. The argument for a price increase will have evaporated. We are already seeing signs of stalling raw material use. China’s steel production in the first two months of 2015, for example, was estimated by the World Steel Association to be 0.2% lower than in the corresponding period of 2014. The International Lead Zinc Study Group estimate of global zinc usage in January 2015 was 1.5% lower than for January 2014.

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John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...


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