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The Common Man: The Case for Zinc

Author : Robert Simpson Date : 4/21/2015 9:29:09 PM

April 20, 2015

Zinc

Zinc is one of the most widely consumed metals in the world, up there with iron, aluminum and copper. It’s used mainly to galvanize steel, is combined with copper and other metals to form materials used in cars and household fixtures and is also important for health in that it’s a necessary element for the growth and development of humans, animals and plants.

That’s your zinc lesson. But what about zinc production and how you can make money from it? There have been many reports lately that zinc mines around the world are slowing, being tapped out, which could create a supply shortage and in turn lead to price increases.

Examples include the closure of Xstrata zinc mines in Canada in recent years, the Lisheen mine in Ireland and the Century zinc mine in Australia, which is set to close later this year. TD states in recent note that the closure of the Century mine could be a “significant catalyst” that could drive zinc prices higher in the near future. Its long-term forecast for zinc is an average of US$1.10 per pound, which is up from around 99 cents today. That should help put a floor on zinc prices, and give stocks a boost.

“Zinc, like all metals, is facing uncertainty about demand given the slowdown in China,” notes Caroline Bain, senior commodities economist at Capital Economics, in a recent report.  ”But we think that the possibility of further targeted stimulus by the authorities has risen and feel confident that the economy will avoid a hard landing.”

Adds Bain, “it is the supply outlook that differentiates zinc from some of the other metals. The deficit in the market — even with relatively subdued demand forecasts — is likely to widen owing to mine closures.”