Zinc Price Driven up by 'Perfect Storm' of Soaring Demand and Dwindling Supply

PALM BEACH, Florida, May 15, 2018 /PRNewswire/ --

Marketnewsupdates.com News Commentary 

What do a pack of batteries, a bottle of sunscreen, and a jar of medicine have in common? All of these everyday products contain zinc. These applications barely scratch the surface of the many applications zinc has in people's everyday lives. This rising demand, coupled with slow growth on the supply side, has driven zinc prices to a decade-high, and reignited investor interest in zinc miners like Trevali Mining Corp. (TSX: TV), Teck Resources (NYSE: TECK) (TSX: TECK.A), Glencore PLC (OTC: GLCNF) (LSE: GLEN), Vedanta Resources PLC (OTC: VDNRF), and Callinex Mines Inc. (TSX-V: CNX) (OTC: CLLXF).

Engineers, Doctors, and Investors All Want Zinc

Zinc's demand is being driven by its diverse range of applications. Consumer demand for zinc is consistently growing, particularly as China also embarks on a massive infrastructure plan. This places customers of the diverse metal, like doctors and building engineers, in direct competition with each other. Pretty much everyone seems to want to get their hands on zinc right now.

However, the real factor driving up the price of zinc is the lack of supply. Wood Mackenzie expects there will be a deficit of 350,000 tonnes this year and 150,000 tonnes in 2019. Inventory now sits at 176,275 tonnes, the lowest since 2008. This lack of supply has played a huge factor in the price of zinc, which has risen by 25% year over year, going from $1,500 per tonne to as high as $3,500 this January- a ten-year high.

This supply deficit is being driven by several factors. First, zinc is not the most common mineral in the world. There are only a limited number of zinc sources available. Second, many existing overseas zinc mines were recently shut down. For example, in 2015, mining giant Glencore cut 500,000 tonnes of production. This has left the door wide open for a new generation of North American zinc miners to fill the void.

With this perfect storm of high demand and low supply driving zinc prices to ten-year highs, it is likely that investors will be closely watching this new generation of zinc mines. Callinex Mines Inc. (TSX-V:CNX) (OTCQX:CLLXF) is an example of a zinc mining company that could benefit from an increase in investor interest in zinc. On Monday, May 14th, 2018, the company released the results of a preliminary economic assessment (PEA) on its Nash Creek deposit in New Brunswick, Canada. The PEA results showed that the property offers an annual production potential of 77 million pounds (35,000 tonnes) of zinc per year. This would allow Callinex Mines Inc. to cover around a tenth of the current global deficit, a significant contribution.