Trafigura rattles zinc market with huge order for LME metal
Orders to withdraw zinc from warehouses overseen by the exchange have surged by 97,225 tons over the past two days.
Zinc became the darling of the mining world, reaching a near three-year high mid-2014.
The four-letter metal benefitted from falling stockpiles and expected supply cuts due to the scheduled closures of among others Australia’s Century and the Lisheen mine in Ireland with a combined output of 600kt.
By September doubts were creeping in and the metal’s stellar run began to look as if it could’ve been too much too soon as mothballed mine restarts were fast-tracked in North America and new capacity were planned everywhere from Sweden to India to Mexico and Peru.
Zinc will end the year up single digits only, but that’s no mean feat into the teeth of a rampant dollar.
Once sky high stocks on the LME and in China will continue to be drawn down – zinc is especially sensitive to stock levels and when it fell below three weeks’ worth in 2006 and 2007 the price shot up to nearly $4,000.
New mines – even in China which has added 225kt capacity every year for the last decade – aren’t opening at a fast enough rate to replenish lost output and meet demand growing at 4% per year.
That said, there are plenty of projects out there and expansions like Glencore’s McArthur River will hit its stride at 370,000tpa in 2015. Refined output from South Korea will jump and projects like Zijin’s 200kt Bayannur smelter will make zinc not all that hard to come by.
Well up, but $2,400 seems like the ceiling for 2015. 2016 could have more upside.
A stockpile shock panics the market.
