Insufficient mine supply bodes well for medium-term zinc, lead – Macquarie – by Dorothy Kosich ( – January 24, 2014)

The recent North American polar vortex, as well as massive snowstorms and freezing temperatures now slamming the U.S. may result in some unseasonal tightness for lead markets, says Macquarie Research.

RENO (MINEWEB) – “Supply/demand conditions look increasingly positive for both zinc and lead in the medium-term, with increasing concern that there is insufficient new mine supply in the pipeline to replace several major closures,” said Macquarie Commodities Research.

“However, on a one-year view, we are more positive on zinc than lead, on the basis that short-term demand conditions look stronger while supply growth has decelerated faster,” said Macquarie analysts in a “Commodities Comment” published Thursday.

Macquarie analysts think that the refined zinc market “is currently in a modest deficit.” “In 2013, TCs rose to a level to re-incentive metal production, a flow that will continue at least until the raw material market tightens up again,” they advised. “We see this as being in 2015 though much depends on how quickly stocks of concentrate are worked through.”

“Though metal production is now rising healthily, data on both consumption and concentrate production still give reason to be cautiously optimistic in 2014,” the analysts suggested. Meanwhile, global zinc mine supply have been weak with growth up just 1.2% YoY, according to the latest International Lead & Zinc Study Group (ILZSG) data.

Nevertheless, “Points of caution continue to hinge around excess inventories of the metal,” Macquarie observed, although LME stocks are at their lowest level since 1Q12.

“Longer term, market concerns are growing that there is insufficient new mine supply in the pipeline to replace several major mine closures,” said the analysts, noting that Canada’s Brunswick and Perseverance have ceased operations, Ireland’s Lisheen is gradually winding down, while Australia’s Century and Namibia’s Skorpion are scheduled to close by 2015/16.

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