RPT-COLUMN-A role reversal for the ugly sisters, lead and zinc – by Andy Home (Reuters U.S. – October 2, 2015)


Oct 2 (Reuters) – The commodities “supercycle”, it is now generally accepted, is over.

Slowdown in China, the lynchpin of the whole concept, is turning out to be a lot harder than anyone expected with industrial metal prices sliding across the board. But for some of them the “supercycle” was arguably over many years ago.

Consider the example of lead and zinc, often called sister metals because they tend to be found in the same deposits and are as often as not mined in tandem.

Zinc’s “supercycle” price peak of $4,580 per tonne, basis three-month metal on the London Metal Exchange (LME), came in November 2006 while lead’s peak of $3,890 followed a year later in October 2007.

Neither made it back to those lofty heights in the Chinese infrastructure-fuelled boom that followed the Global Financial Crisis of 2008-2009. And since then the two sisters have done little more than trudge sideways in well-worn ranges until joining in this year’s broader sell-off.

Such an uninspiring price performance has left the two being dubbed the ugly sisters, to be played off against each other in one of the LME Street’s favourite relative-value plays.

That relative value trade has recently been turned on its head with lead re-establishing a premium over zinc for the first time since June of last year.

The premium itself is still small and tentative. As of Thursday’s closing evaluations zinc ($1,687.50) was once again just out in front of lead ($1,649.00).

And the relationship looks set to remain confused and confusing since the turnaround has been driven by confused and confusing visible stock movements.

For the rest of this article, click here: http://www.reuters.com/article/2015/10/02/zinc-lead-ahome-idUSL5N1221ZZ20151002