Zinc prices on the London Metals Exchange (LME) have continued to track higher on an improving balance between the global demand and supply. The price fell slightly this week, down to US $2,008.75/tonne by mid-day Thursday, but remained up almost nine percent since the beginning of the year when prices were at $1,845/tonne.
Initial news of a zinc price rebalancing occurred at the beginning of the year when prices gained more than $300/tonne on fears that upcoming mine closures will leave markets under-supplied and incapable of dealing with developing world growth.
But despite recent gains, zinc prices are still down more than 14 percent in the last year on growing warehouse stockpiles which hit a 17 year high in April with over 900,000 tonnes in storage.
Bloomberg described current zinc price dynamics as backwardation, when near-date deliveries are more expensive than later date deliveries reflecting concerns about short-term supply. Currently, there is a rush to hold zinc due to the perceived value the metal can offer once mines begin closing by late 2013.
“There is so much metal around that warehouses believe that there is value in filling up” their space, London-based trader Andrew Silver of Natixis Commodity Markets Ltd., told Bloomberg.