Scottsdale, Arizona 24/02/2016 - The global zinc concentrate market will post a 755,000 tonne deficit this year and will become tight in historical terms in the third quarter when stocks fall to 29 days of consumption from 41 days in the first quarter, Chris Parker, research director at Wood Mackenzie, said on Tuesday.
Wood Mackenzie defines a tight concentrate market as one that has less then 30 days of consumption, Parker explained at the International Zinc Association (IZA) conference here.
Mine production cuts in 2016 will total 1.16 million tonnes of concentrates this year due to closures of the key Century, Lisheen and Magellan mines as well as 400,000 tonnes of production curtailments by integrated miner-trader Glencore.
The refined zinc market, meanwhile, is expected to record a 345,000 tonne deficit this year but stock levels will only fall to 50 days of consumption by year end. A tight refined zinc market, which Parker defined as 40 stock days, won't emerge until the first half of 2017.
"It's really next year when there's going to be a tight, tight, tight concentrate and refined market. And if that doesn't bring the price up, I really don't know what will," Parker said.
Prices are expected to average $1,550 per tonne in the first quarter, $1,650 in the second quarter, $1,700 in the third quarter and $2,400 in the fourth quarter, according to Wood Mackenzie's forecast.
The firm does, however, assume that Glencore's cut production will be brought back on-line in January 2017 when prices are projected to be higher.
"We don't know exactly what price Glencore thinks is the right level to reactive those operations but I would guess its somewhere between $2,000 and $2,500," Parker said.