Zinc: the new must-buy metal?

Photo: Subarcticmike

Zinc may become the new must-buy metal this year, as supply faces a significant dip.

China's MMG Ltd has begun to close down a mine in Australia, a decision that will see 4 per cent of the world's zinc output disappear from the market altogether. With no replacement source readily apparent, zince is suddenly looking to be in short supply.

Indeed, a string of mines are now becoming tapped out, notes Bloomberg, with Morgan Stanley now predicting 1.2 million tons of annual mined metal to be taken out of production within the next two years - more than America uses in one year.

The material, though, is extremely common across a range of products: zinc appaers in everything from car parts to sun-screen. With stock sliding, demand has already outpaced supply by the biggest margin in nine years. By next year, that gap is expected to double, according to both Bloomberg Intelligence and the International Lead & Zinc Study Group.

"It’s all about supply," Clive Burstow, a London-based investment manager at Baring Asset Management, tells the news agency.

"It’s simply that the big mines are coming off stream this year, and there’s no big supply to replace it. So, we’re naturally moving into an increasing deficit market."

As a result, experts are forecast higher prices, while zinc's value enjoyed a rise of 7.5 per cent year-on-year, its longest rally in eight months. With zinc still 50 per cent below its 2006 peak value, is this the year to investigate zinc as a commodity investment?