London Metal Exchange warehouse stocks of the galvanizing metal total 36,525 tonnes, the lowest amount this century.Almost 60% of that metal is earmarked for physical load-out, leaving just 15,175 tonnes of live tonnage, no more than a few hours worth of global consumption.The clear-out of visible zinc inventory has played out in a year of weak demand, usage falling by 3.2% over the first 10 months of this year, according to the International Lead and Zinc Study Group .
Production fell in China, Kazakhstan, Canada and Mexico, all of which are major sources of refined metal. The company’s Auby smelter in France, by contrast, will now not come back from scheduled maintenance but remain on care and maintenance until further notice. Such historically high premiums in the physical supply chain have both diverted metal from the terminal market and inverted China’s normal trade flows.
But Chinese zinc has also been exported to far-flung destinations such as Turkey, Italy, Mexico and the United States to plug gaps in the rest of the world’s supply. Macquarie Bank agrees, forecasting prices to bottom out at $2,500 in the second quarter and to remain subdued as the market shifts back to surplus.