The zinc price has been in something of a quandary. Over the past couple of weeks it has been range trading around the US$1,800/t level, with the three-month benchmark LME price at US$1,760/t this morning. It is testing its 200-day moving average price on the downside, having broken through it in February. If it continues to support this level, this suggests that confidence will really have come back into this commodity.
Zinc had a torrid 2015. It hit a six-and-a-half year low in mid-January at US$1,444.50/t due to continued oversupply and weak demand. The key to its rally (zinc was the best performing base metal over 1Q16) has been, as is traditional, a cut in supply. These cuts came in late 2015 came from Vedanta Resources (at its Lisheen mine in Ireland), MMG (the Century Mine in Australia), Nyrstar (suspending operations in North and Central America) and Glencore (which cut a third of its zinc output). These savage cuts are having a dramatic effect.
Dependent on what you read, supply will be cut by anything from 3.3% to 4.5% during 2016. Demand, though, is expected to be stable, rising up to 1% during the year. This even excludes any potential stimulus package from China, which I think is wise until we see exactly what, if anything, is on the table.
So, where do we go from here? Well, forecasts are in the region of US$1,830-2,000/t by the year end. This relatively reassuring outlook is giving confidence to a number of junior zinc projects around the world, including North River Resources† (NRRP LN), which is currently drilling the northern zone of its Namib zinc mine deposit in Namibia. Look out for more newsflow from the company over the next few weeks as these results continue to come in. Also, let us know if you’d like to see its CEO, James Beams, who we have available for meetings.
