Zinc has enjoyed one of the most positive fundamental pictures of all the base metals. The looming closure of major mines such as Century in Australia and Lisheen in Ireland next year due to mineral depletion has most analysts predicting the deficit of this year only getting worse in the years to come.
The three-month Lead price on the LME closed on Monday at $2113/ton and the picture is starting to look more bullish than bearish for zinc.
The fundamentals point to market tightness and the chart pattern is quite bullish. It looks like Zinc might be able to finally break above $2,200/t. In that case, Zinc will reach an almost 3-year high which translates into high price risk.
The right moment to go long is if Zinc breaks above $2,200/t. This might seem contradictory as you might be asking: why not buy now when prices are cheaper? Well, the reason is that there are many chances of seeing Zinc bounce back down, which is what happened in the beginning of 2013. However, if prices manage to break above resistance levels, that’s the moment with the highest probability of Zinc surging, therefore, the best time to buy/hedge.
What This Means For Metal Buyers
Zinc is showing more strength than weakness. We might see Zinc reach a three-year high this year. We recommend zinc buyers to watch the market closely and take long-term positions if prices break above $2,200/t.