Toward a bull run for lead and zinc?

Commodities , Lead , Metals , Zinc Nov 12, 2013 No Comments

Lead and zincFrom aluminum to copper, prices of almost all metals have been in decline since the beginning of the year, plagued by stocks and surpluses. But two of them have moved in the opposite direction: lead and zinc prices are on the rise, a trend that is unique among metals.

70% of worldwide lead comes from batteries recycling. Since the financial crisis and the impact it had on western countries new car sales, recycled lead quantities have dropped. At the same time, production of primary lead also decreased.

The International Lead and Zinc Study Group expects that there will be a small 22,000 tonnes surplus in the global market for refined lead metal in 2013. In 2014, the market is expected to be in deficit for the first time since 2009 with the extent of the shortage estimated at 23,000 tonnes.

As for zinc, there might be a shortage but in a longer term. This will be due to the closure of major mines which will impact the supply side: production will decline by 10% in the next three years, with the closure of old mines in Australia, Ireland, South Africa and Poland. At the same time, the demand will rise moderately but surely with China increasing the quality of its steel to reach the international standard (Zinc is used to galvanize steel) and buying more of the metal to rust-proof new cars and coat steel used to build bridges and skyscrapers.

The ILZSG also expects that world supply of refined zinc metal will continue to exceed demand in both 2013 and 2014. However, at 120,000 tonnes this year and 115,000 tonnes in 2014, the size of the surpluses are forecast to be lower than has been the case over the past four years.

A global hunt is on to find new deposits of zinc. China Nonferrous has agreed to buy a 50 percent stake in a joint venture to develop the Ozernoye deposit in Russia’s Republic of Buryatia – one of the world’s largest by zinc reserves – and build an ore mining and processing plant.

South African Mike Oppenheimer favours Burkina Faso. Oppenheimer is acting chief executive of Blackthorn Resources, which this month made its first shipment via neighbouring Ivory Coast. It is Burkina Faso’s first zinc mineGlencore Xstrata owns 62.7 percent of the project and has agreed to buy all the zinc the company can mine.

Pascal Blanc

Pascal has implemented numerous software solutions in the areas of procurement, sourcing, spend management, supplier evaluation and performance. His clients include Fortune 500 companies in Europe, Asia and North America. He is a co-founder of Source & Procure.

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