I attended and presented at the inaugural Zinc Roundtable on October 11 & 12 in Pittsburgh and was very impressed with the event.  Billed as an opportunity for zinc users of all types (galvanizers, brass, die-casters, sheet producers, et al.) to learn about the current situation with zinc supply, demand, and pricing, the Roundtable delivered.  One-hundred seven people attended, with 65% of the attendees representing users of zinc, 25% producers/traders, and 10% other organizations such as associations and the press.

Both days of the Roundtable provided ample networking time around morning and afternoon educational sessions presented by users, zinc industry analysts, and association personnel.  There were five galvanizing companies represented and of interest to me and I suspect them was the picture of the zinc industry today and the forecast for the next 12 – 36 months.  Below is a rundown of the important points made by the analysts and other presenters.

Salim Bhabhrawala – U.S. Department of Commerce

  • China is looking to revise the definition of zinc scrap content, which may affect what is imported by them for re-melt.

Tom Jennemann – American Metal Market Editor

  • Much of the zinc in NOLA LME warehouse is more than 5 years old and of Chinese and Spanish origin. Since 2013, NOLA stocks have been declining but much is being moved to other warehouse closer to the anticipated users, e.g. shipped to the Pan-Asia area waiting for a shortage of metal in China to cause an uptick in demand.
  • Since November of 2016, zinc metal has been in backwardation, meaning the 3- and 6-month forward price is lower than the current price.  This has also caused some metal to move from NOLA because it makes storing charges expensive.
  • The $77 backwardation price of today should be attracting a lot of metal back to NOLA and it is not, which means there isn’t as much metal off warrant as many believe.
  • ILZSG is forecasting a 227,000 ton zinc metal deficit for 2017.
  • Even with Chinese demand likely to decline in Q1 2018 and the closure of some small, polluting and inefficient mines will require China to import metal in 2018.
  • AMM is bullish on zinc because of fewer hidden inventory, the closure of some Chinese mines, and strong fundamentals.  The forecast is for an average of $3,000 to $3100 for 2017.

Lynn Lupori – CRU

  • CRU focus is more on the mine supply side
  • Margins for miners are expect to continue to climb through 2021.
  • There is a tight concentrate supply, which means lower treatment charges charged by the smelters.  Lower TCs mean there is no incentive to add smelter capacity, which in turn translates to tighter zinc metal supply downstream.
  • The demand for zinc will rise in the next five years by 1.3 million metric tons, with 60% of that coming from China, 20% from other Asian countries, and 20% from the ROW – only 4% anticipated from the U.S.
  • Concentrate supply will increase in 2019 but because of tight smelter capacity, this will mean a short-term blip in prices going down.
  • The general trend is bullish until 2021.

In the current backwardation climate, if metal does not come back into NOLA, the physical zinc metal will be in tight supply in 2018. I highly suggest galvanizers consider attending the 2018 Roundtable, tentatively set for late October in Chicago.  For contemporary insight into zinc metal supply and pricing, the event was extremely valuable

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