Nirmal Bang, Emkay More Bullish On 2014 Zinc Prices Than We Are

Indian analysts tracking zinc seem quite upbeat about the metal this year. Most expect the zinc market to remain in deficit again this year again. And that means attractive prices, in their books.

Well-known Indian stockbroking firm Nirmal Bang, for example, has stated in its fundamental report on zinc that the combination of rising global zinc demand along with supply shortfalls due to closures of some major zinc operations in 2013 and 2014 were expected to create a supply deficit in the zinc market and therefore, zinc prices would remain strong in the year 2014.

MetalMiner interjected a note of caution earlier on forecasts that tried to push a liberal dose of optimism favoring a rapid price growth for zinc this year. So while the global zinc market remains divided over whether 2014 will see a rapid price climb, Indian traders are erring on the side of the positive.

The zinc market has remained in surplus for the last four years. According to moneycontrol.com, the Nirmal Bang report had recorded that during the Jan-Oct period of 2013, zinc markets had been in deficit of 2,000 tons as compared to 101,000 tons in the Jan-Oct 2012 period.

Global zinc demand was expected to rise by 6 percent in the year 2013 from the previous year with demand coming from major consuming regions like China, the US and Europe. During the Jan-Oct 2013 period, zinc refined production had increased by almost 6 percent, while zinc consumption went up by 7 percent as compared to the previous year, hinting that the surplus could slowly turn into deficit in the coming year.

Another financial services firm, Emkay Global Financial Services also said in its own report on the overall metal sector that it preferred to back zinc among the base metals, but at the same time, the US tapering of QE3 and LME warehousing issues would continue to be “the overhang on the pack.”

Most Indian analysts have based their forecast on encouraging global economic recovery in the major consuming regions like China, India in the last three months and a US economic recovery, putting upward pressure on global zinc prices. Nirmal Bang’s outlook, for example, stated that prices were expected to move up towards US $2,350-$ 2,450 per ton in the next two quarters of 2014.

Emkay said in the last two weeks of December 2013, base metals prices had made a strong comeback with zinc leading the pack due to its own strong fundamentals. Zinc prices shot up 13 percent followed by copper at 6 percent, clearly showing where things were headed in January.

What This Means For Metal Buyers
There may or may not be a supply shortage this year, although there’s no doubt the fundamentals for zinc remain strong. Even though MetalMiner doesn’t see zinc prices rising in the short term, there seems to be no harm in investing in the metal in the long run.

by Sohrab Darabshaw