Too often in previous years those betting on higher zinc prices have suffered burnt fingers, but for now some are cautiously optimistic that a deficit and falling stocks will buoy prices.
Historically, supplies of the metal -- used to galvanise steel -- go from feast-to-famine as miners ramp up output when prices rise and cut when prices fall. However, producers are now more wary and are looking for sustainably higher prices to boost and protect profit margins.
"Zinc does come with baggage, it’s destroyed a lot of shareholder value. Miners are being careful," said Robin Bhar, metals analyst at Societe Generale. "But demand is healthy and supplies are falling ... Mines have closed and more are due to close. Overall about a million tonnes of zinc in concentrate will be taken out."
Planned closures include the Century mine in Australia owned by China’s MMG and Vedanta Resources’ Lisheen mine in Ireland. Restarts of existing mines such as Teck Resources’ Pend Oreille and Trevali’s Caribou zinc mine could take up some of the slack. But new projects such as Vedanta’s Gamsberg in South Africa will not be producing for a couple of years.
Zinc prices at around US$2,200 a tonne may be high enough for some to contemplate restarting mothballed mines. "Another $200 or $300 would make a much stronger case," a producer said. "There’s plenty of (concentrate) supply at the moment for smelters."
Some are concerned about China’s zinc exports, which are climbing. But at 39,489 tonnes between January and March, they are for now a fraction of total demand estimated at nearly 14 million tonnes this year.