Analysis – Zinc rally may have further to run as supply shortfall bites – by Melanie Burton (Reuters U.K. – February 27, 2017)

MELBOURNE- London zinc prices CMZN3 have nearly doubled over the past 13 months and are closing in on nine-year highs, but signs of tightening in the global market for refined zinc means the rally may have further to run.

Zinc bulls pushed prices higher after the closure of several giant zinc mines last year led to a steep drop in global ore supply, setting the stage for a shortage of the metal used to rust-proof steel.

There are now signs that shortage is materialising, with global stocks shrinking and prices for spot metal rising, just as post-holiday demand picks up in China and a strike at North America’s second-largest zinc plant further cuts supply.

“Any kind of financial investor who invests in base metals is long zinc, that’s in New York, London, and Shanghai,” said Ivan Szpakowski, Chief Investment Officer of Academia Capital, a U.S.-based emerging markets and commodities-focused hedge fund.

“It’s by no means maxed out, there’s more money that can be pushed in, and more money from multi-asset type investors.” Higher zinc prices will provide an additional boost for diversified miners such as Teck Resources (TECKb.TO) and Glencore (GLEN.L), which are also being supported by an expected rally in copper.

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