COLUMN-As Glencore restarts capacity, is time up for zinc rally? – by Andy Home (Reuters U.S. – December 14, 2017)

LONDON, Dec 14 (Reuters) – When Glencore announced it was curtailing 500,000 tonnes of capacity at its zinc mines in October 2015, the price of three-month zinc on the London Metal Exchange was $1,700 per tonne.

The price is now $3,175 per tonne, hovering within striking distance of last month’s 10-year high of $3,326. Glencore can’t take full credit for the bull surge of the last two years but its curtailments acted as a powerful accelerator to a structural shift towards supply deficit.

So what happens next, now the company has just announced the first restart at the Lady Loretta mine in Australia? The market seems unfazed. Indeed, LME zinc rallied on the news, the bear sting masked by a headline decline in forecast production next year.

It’s probably right to be sanguine. Glencore has delivered exactly what it had previously signalled. The restarts will be both partial and gradual and will take a long time to feed through into the refined metal part of the supply chain.

And refined zinc still looks super tight, although there are warning signs for bulls, not least Glencore’s own purchase of a stake in a mothballed plant in the United States.

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