LME Week: Inventory draw, limited supply to buoy zinc prices

LONDON, Oct 8 (SMM) – Zinc underperformed but inventory declines and expectations of lower new mine supply could buoy prices, according to SMM general manager, Ian Roper.

Hidden refined inventory become more visible as holders took profits earlier in the year, and prices have since collapsed, he explained at the LME week in London on Monday October 8.

The recent months saw a continued inventory draw, especially in China, where total zinc inventory including bonded stocks has fallen from over 450,000 mt to under 200,000 mt. Zinc is faces the greatest risk of a short squeeze should macro sentiment improve, he added. 

Domestic zinc mine supply continued to struggle on environmental pressures, and the market will remain in deficit this and next year, Roper said. Strict environmental licensing regulation is likely to lower domestic output this year despite the addition of 150,000-160,000 mt of new mine capacity. 

He also noted that zinc treatment charges (TCs) have risen due to smelter maintenance cuts and higher supplies of concentrate.