Xstrata Plc sees the global zinc market moving into structural
deficit as new mine supply fails to keep pace with a 5-percent
annualized increase in demand.
The refined market has
been in deficit for seven consecutive quarters and spot
premiums for special high-grade zinc are rising globally while
exchange stocks are falling, the company said in its first
investor day since completing the acquisition of Xstrata.
market will also move into a deficit over the next few years as
miners fail to deliver the 600,000 tonnes per year of new mine
supply needed to keep pace with demand, Daniel Maté,
head of zinc and lead marketing, told investors in London Sept.
Zinc supply forecasts
in recent years have tended to show a steep drop-off in supply
two or three years down the pipeline, but so far zinc miners
have been able to meet the projected shortfall by investing in
expansions and new projects extending the lives of mines.
But Glencore believes
the market will enter a structural deficit this time around
because the industry is more disciplined, major producers have
exited the business due to poor returns and junior miners
wont be able to secure financing to bring their projects
online, Maté said, adding that as fading mine supply
creates a steepening deficit over the next few years, the zinc
market might witness a bull run similar to the spikes in 1988,
1992, 1997 or 2006.
"I have been doing
this for 25 years ... and I can tell you when it rallies, it
rallies big time," he said.
already bullish projections for zinc supply might even be too
conservative, Maté said.
"All this is based on
official Chinese figures, and we honestly believe they are
overstated. There is the potential for the change to be even
more brutal and sudden than anticipated," he said.
A version of this
article was first published in AMM sister publication Metal