Zinc has been the second weakest performer among the London Metal Exchange base metals pack so far this year.
The International Lead and Zinc Study Group’s statistics committee met earlier this month and reversed its April assessment the market would register a small supply deficit of 45,000 tonnes this year. The ILZSG has downgraded its global usage estimates since it last met in April. Forecast growth in 2023 has been cut from 2.1% to 1.1% with Europe the point of maximum weakness.
Any impact on supply has been more than offset by particularly strong run-rates at Chinese smelters, which have soaked up excess mine concentrates this year. But most of what arrived in August was quickly snapped up and cancelled in preparation for physical load-out from the LME warehouse system. The profitability of the trade is also dependent on the cost of storage. LME on-warrant storage costs can be very high, which is why zinc is disappearing into the shadows under a bespoke off-market rental deal.Zinc has seen this sort of stocks financing before, most recently at the end of the last decade, when LME warehouses in New Orleans were at the centre of the play.