Friday, December 2, 2016

The King of Zinc Watches and Waits (GLEN)

I'm not sure what they are waiting for at this point. Here's Kitco spot for the last year:
From Bloomberg Gadfly, Nov. 30:
The year's craziest industrial metal just got crazier.

Shanghai zinc futures hit their highest level in nine years on Tuesday, surging as much as 5.8 percent intraday. On Wednesday, after traders closing out positions pushed three-month contracts on the London Metal Exchange down 6.9 percent overnight, they posted a record drop, giving away all the gains made since last week.

The dog that hasn't barked here is Glencore Plc. The commodity trader is the king of zinc, accounting for more than 10 percent of global output in a good year. But it's been holding back since late last year, after the slump in prices reduced the profitability of its mines.

How Glencore chooses to dispose of its 500,000 metric tons of mothballed capacity -- equivalent to about 3.7 percent of global zinc output last year -- will be crucial in deciding whether the current run of high prices continues or sputters. If the company promises to continue its policy of watching and waiting in an investor update on Thursday, zinc bulls might do well to cut their positions.
Despite a bumper year for zinc in 2016, there's good reason to be cautious about the outlook. Much of the buoyant pricing has come as a result of withdrawn supply -- not just from Glencore's mines in Australia, Kazakhstan, and Peru, but also from sites like Vedanta Resources Plc's pits in India and Ireland.

Still Short
The world will still not have enough zinc next year, even if mine output rises sharply...MORE
"Goldman Overweights Commodities for First Time in Four Years"
...“The recent re-acceleration in global PMIs suggests commodity markets are entering a cyclically stronger environment,” Goldman analysts led by Jeff Currie wrote in a report e-mailed Monday. “Supply restrictions from policy actions should benefit oil, coking coal and nickel in the near term while economic reductions should boost natural gas and zinc.”...MORE
Just to hammer the point home, here's Kitco's 5-year chart: