Zinc turning bull? – by Kip Keen (Mineweb.com – October 13, 2015)


We look at the question of how much Glencore’s zinc cuts matter.

HALIFAX, NS – There’s no doubt that Glencore, in planning to axe some 500 000 tonnes zinc output, is throwing it’s weight around in the zinc market. The cut amounts to nearly 4% of world supply from mines. Indeed, zinc is a market where Glencore can, acting alone, make a difference to the big picture by curtailing operations.

But with demand growth for zinc and other metals waning in China somewhat, with a notable downturn in new construction there among other things, you wonder if, or to what degree, Glencore is chasing down a declining market (in growth terms).

With this question in mind, we asked BMO analyst Jessica Fung her view on how much of a difference Glencore’s zinc cuts make to the zinc market. She responds, “Glencore’s cuts do matter.”

To give perspective, she puts the zinc cut in copper terms. “Another way I have been explaining the impact of these cuts is that if this were announced in the copper market, it would be equivalent to 1 million tonnes of mine supply, which would be a very big cut from a copper miner.”

So, with a sizeble cut to zinc output in mind, Fung now forecasts a market that looks set to get tight – finally some might add.

“We were forecasting a 74kt surplus next year (pre-Glencore cuts) assuming 2.8% demand growth,” she writes in an email. “If we assume zero growth, it’s about 400kt that we remove from the demand side of the equation.

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