Zinc & Lead
Deficit continues to grow
November 2017
In October, the zinc cash price averaged US$3,265/t (US$1.48/lb), 4.7% higher than the September average. At the end of October, deliverable LME and SHFE stocks covered only 4.2 days of annual demand. The forecast refined zinc deficit for 2017 has been increased by 185kt to 735kt.

Over the first 16 days of October, the zinc cash price remained relatively stable averaging US$3,310/t (US$1.50/lb). The price then fell to a monthly low of US$3,110/t (US$1.41/lb) as traders became cautious about a rise in zinc stocks from 253kt to 272kt. The price then slowly rose to close the month at US$3,322/t (US$1.51/lb), 3.6% higher than the September close.

LME warehouse zinc stocks are increasing. After falling for ten straight months, LME stocks rose in September and October to close October at 257.2kt, an increase of 0.7% from the September close. However, on-warrant or available LME zinc inventories rose 31.4kt to 161.6kt as zinc that had been earmarked for delivery retuned to the books. SHFE deliverable stocks also rose, closing October at 71.6kt, 10.9% higher than September. Total visible stocks (deliverable LME and SHFE) at the end of October covered only 4.2 days of annual demand.

In October, spot treatment charges for imported zinc concentrate into China averaged US$25/t, 47% or US$22/t lower than the September average. The last two months have seen average treatment charges fall after rising every prior month in 2017. The falling treatment charges are the result of a tight concentrate supply, which has limited production for some smelters.

AME forecasts global refined zinc demand to rise 4.2% in 2017 to 14.4Mt, up from the 2.8% growth in 2016. This is unchanged from our October Outlook. Demand will continue to be driven by China, where demand is forecast to grow 4.3% to 7.02Mt. China’s demand for zinc is rising on the back of strong housing and infrastructure growth.

AME has increased its 2017 refined zinc market deficit forecast by 185kt to 735kt. The main contributor to the change has been lower output from China, where production has been affected by environmental protection policies. Outside of China, lower than expected production from Boliden’s 315ktpa Kokkola and 200ktpa Odda smelters in the September Quarter of 2017 have also increased the deficit. Kokkola encountered cell house issues while Odda had roaster problems. Both issues are expected to affect production in the December Quarter of 2017.