This article is an extract of the monthly Commodity Briefing Service for Zinc which examines global zinc market trends over the past month.
By Efosa Obasohan | 30 June 2017
As June comes to a close, zinc prices have recovered to above US$2,700/t after posting a seven-month low of US$2,428/t on June 7. Price support has been provided by falling exchange stocks — both on the London Metal Exchange (LME) and the Shanghai Futures Exchange (SHFE) — U.S. dollar weakness and an improved Chinese steel price, with the latter injecting some hope for a pick-up in demand for galvanized steel. In the final week of June, the SHFE rebar contract gained over 6%, largely ascribed to short-covering and new buying.
Commodities, including zinc, have benefited from the falling U.S. dollar, which has been aided recently by a delay in the U.S. healthcare bill vote and by comments from Fed Chair Janet Yellen that asset valuations are "somewhat rich." The euro also gained against the dollar on expectations of reduced European Central Bank stimulus later this year.
From a fundamental standpoint, S&P Global Market Intelligence sees the global zinc concentrates market continuing in deficit through 2019. As explained in the inaugural Zinc Commodity Briefing Service*, this deficit will feed into a shortage of refined metal, keeping upward pressure on prices. We forecast an annual average price of US$2,796/t in 2018, 2.4% higher than this year's expectation for US$2,730/t. Increased mine supply and smelter capacity utilization will return the refined market to balance by 2019, when prices are expected to slip back to average US$2,575/t.
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