LME Asia Week: Zinc prices see 'severe downside'

HONG KONG, May 16 (SMM) – Following a strong rally earlier this year to 10-year highs, zinc prices have retreated and looked like “an old man in the room” compared with other metals, according to Vivienne Lloyd, senior analyst of base metals at Macquarie Bank.

This was largely due to increased exchange inventory and a flattened forward curve, she told delegates at a seminar held by the investment bank on Wednesday May 16 in Hong Kong during LME Asia week.

Investors then started to be nervous and pulled away from the “golden child”, Lloyd added.

While the concentrate market remains tight, she believes that it is set to be more balanced soon and that higher concentrate treatment charges (TCs) will emerge by the end of the year.

In fact, new mine tonnes have shown up in the trade, and Lloyd expects a “severe downside” of the market.

She predicted LME zinc prices to average $2,850/mt in the fourth quarter of this year and $2,600/mt in 2019.

Driven by high prices, demand is likely to be suppressed by other substitutes.

Lloyd also predicted that the average zinc-lead spread on the LME to will narrow to $450/mt next year, from the current $750/mt, as she sees less incoming lead supply and more robust demand.  

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