During the first half of 2017, Zn prices on LME grew up to 34% comparing with the same period of 2016.
The spike took place during February/March followed by a slide in April and May with a resumption in June when prices returned to the high levels of February.
Nowdays we are in Summer time, when normally the industrial activity slows down, but in contrast the prices continue to be tight.
Why?
First of all we have to stress that this is not a novelty, because we have noticed the same patter in 2016.
The main reasons are due to:
the decline of stocks at the LME warehouses to 284.500 tonnes on 5th July 2017 (only 2% of the world consumption, very low level) with a reduction of 34% from May 2017. In addition a lot of warrants certificates have been cancelled dropping from 100.000 tonnes down to 79.000 tonnes.
We have to underline that the reduction in stocks is not due to a buoyant demand (at the moment it’s lacklustre everywhere) but mainly due to the production cuts of Zn metal decided at the end of 2015 by the 4 worldwide Zn producers.
In USA the demand is stagnant, waiting for Trump stimolus, but anyhow the stocks continue to decline, this due to the strike at the local smelter which lasts since 5 months.
Other factor to be taken into consideration are:
the weakness of USA dollar
the prices arbitrage between LME and SHFE (during May up to 22nd June the arbitrage was in favour of China as a consequence the import of metal rised up.
The present situation is expected to remain stable for the rest of 2017 and this perspective let the experts to foresee the Zn prices ramping up to the level reached on January/February 2017. If this happens we can expect a price rice of 2,5% above the present level.