Market and product
Lead and zinc supplies weighing on market
Having increased in May, the surplus is heavier in zinc at 209,000 tonnes or 4.2% of reported consumption, while Macquarie notes in the lead market the surplus was just 34,000 tonnes or less than 1% of reported consumption. For zinc it has been record production driving up metal stocks, Macquarie noting the increases in output have been enough to outrun what has been a relatively robust recovery in demand over the past year.
With stockpiles increasing Macquarie suggests there is downside risk for the zinc price, especially as it is likely to take a period of price weakness to put producers under enough pressure to cause a reduction in supply of the metal. This implies a price below USD 2,000 per tonne according to Macquarie, as at this level the stockbroker estimates most of the world's production remains profitable.
ASX listed companies offering exposure to zinc include
1. Intec Limited
2. Prairie Downs Metals
3. Abra Mining
4. Kagara, Perilya
5. CBH Resources
6. Terramin Australia
7. Meridian Minerals
As well, Ironbark Zinc Zinc Co Australia, TNG Limited, Overland Resources, Union Resources, Tri Origin Minerals, Metals Australia, Jabiru Metals, Rox Resources, Anglo Australian Resources and Bass Metals provide varying levels of exposure.
Conditions are different in the lead market in Macquarie's view as if there is any pullback in zinc production there will be supply issues in lead as well given it is essentially a by-product of zinc mining. Macquarie expects the lead market will move closer to balance in coming months, something that should support prices in its view.
(Sourced from Proactiveinvestors.com)
