Zinc: A scarce commodity

Raw materials in this article

by Emmeran Eder, Euro on Sunday

Dhe Chinese economy appears to be recovering. The end of the lockdown in the economic metropolis of Shanghai and other cities is contributing to this. According to the official purchasing manager index for state-owned companies, that for small and medium-sized companies has also risen. Although both climbed less than expected, the improvement in economic sentiment suggests that the bottom has already been reached.

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A comeback of the economy should ensure that the demand for industrial metals increases again. This includes zinc. The metal is primarily used to protect steel and iron against corrosion. Market participants expect that China’s government will launch economic stimulus programs after the lockdown, as unemployment in the giant country is unusually high. Much of the capital will flow into infrastructure programs that require steel and iron, and therefore zinc.

Use in new batteries

In addition, zinc-ion and zinc-air batteries could soon compete with lithium-ion batteries. They are considered to be more powerful, safer, more environmentally friendly and cheaper. Research here is already well advanced. That would further increase demand for the industrial metal zinc.

It’s high now. The zinc market is tight. This is probably why the price of the industrial metal has recently recovered and is approaching the $4,000 a ton mark. The previous correction, during which zinc prices lost more than 20 percent in almost four weeks in April and May, appears to have ended. According to data from the International Organization Lead and Zinc Study Group, the global zinc market was only largely balanced in the first quarter – after a high supply surplus in the same period last year.

Low stocks

In addition, zinc stocks on the London Metal Exchange are now at their lowest level for more than a year at around 85,000 tons. Moreover, almost half of them have been requested for extradition. From a historical perspective, the freely available zinc stocks are currently at a low level.

Therefore, the price of the metal is likely to continue its upward trend. With an etc (WKN: A0KRK7) from WisdomTree, investors can participate. The fee is 0.49 percent annually.

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Image sources: Jarous / Shutterstock.com, SARIN KUNTHONG / Shutterstock.com