Madrid 10/05/2016 - Zinc prices should rise in 2017 due to supply tightness for raw materials, panel speakers said during the Metal Bulletin zinc conference in Madrid.
"We are see the average price for zinc at $1,750 per tonne for 2016, while our forecasts for 2017 would reach $2,100," said Robin Bhar, head of metals research at Societe Generale, who predicted refined zinc deficits of 190,000 tonnes and 400,000 tonnes in 2016 and 2017 respectively.
"Zinc fundamentals should continue to improve over the medium term as the concentrate market moves into structural deficit. Chinese refined production and exports have filled the gap but are not sustainable given announced prodution cuts by Chinese smelters," Bhar added.
Refined zinc output increased 4.9 percent year-on-year in 2015, despite the fact that raw material supply has tightened to 4.75 million tonnes - a decline of 10.5 percent year-on-year.
"As the concentrate market moves into a structural deficit and concentrate stocks are drawn down, we would expect ongoing constraint on refined production," Bhar said. "Overall, total industry stocks including reported and unreported could help to meet any potential market shortfall over the short term, but longer term, the cushion is unlikely to be available to the market."
On the demand side, Bhar predicts that global consumption of zinc is set to grow at two percent year on year in 2016 while latest ILZSG forecasted demand for refined zinc would increase 3.25 percent to 14.33 million tonnes, principally due to China.
Morgan Stanley also bullish on zinc - it predicts prices to average of 80 cents pound ($1,763 per tonne) and 1 per pound ($2,204 per tonne) by 2020, said Morgan Stanley analyst Tom Price.
The concentrate supply deficit could widen to more than 500,00 tonnes in 2017 from just shy of 100,000 tonnes in 2016, he added.
Macquarie meanwhile think that China is the main victim of tighter concentrates market, but the current high stocks of refined zinc means that "no one is scrambling for metals just yet", said Vivienne Lloyd, senior analyst from Macquarie Capital.
(Edited by Tom Jennemann)