While frozen orange juice supply shortages may have caused its price to hit a record high on Tuesday, something that’s less of a fad was also pushing prices sky-high. Zinc.
The price for zinc rose to a five-year high today on growing expectations of a global supply shortage as traders met in London for the second day of the annual London Metal Exchange Week party.
The price for zinc hit $2,485 a tonne on the London Metal Exchange, up 50% this year amid a broader commodities rebound. That also boosted shares of producers such as India’s Hindustan Zinc, which rose 8% Tuesday.
Mining stocks with an interest in zinc, such as Endeavour Silver Corp (NYSE:EXK, TSE:EDR), gained on Tuesday. Endeavour shares closed up 4.4% at C$6.15 in Toronto and up 4.6% at $4.60 on Wall Street.
First Majestic Silver Corp (TSE:FR) also had a great run, up 7.6% at C$11.59 while Duran Ventures (CVE:DRV) rose 5.3% to C$0.10.
Another Canadian stock, Excellon Resources Inc. (TSE:EXN) rocketed by 11.8% to C$1.90, Nicola Mining Inc (CVE:NIM) was up 6.3% at C$0.17, while Vancouver-based but New York-listed Eldorado Gold Corp (NYSE:EGO) advanced by 4.6% to $3.30.
The metal was boosted by a report from the International Lead and Zinc Study Group, which predicted a zinc deficit of 248,000 tonnes in 2017. That would also be the fourth supply deficit in the last five years.
Zinc has been the best performing metal this year after Swiss mining giant Glencore (LON:GLEN) agreed to cut its annual zinc production in October of last year in the face of low prices. In fact, doing what oil investors can only dream that OPEC will carry through later this month.
That said analysts are concerned that there is higher inventory of the metal than is apparent on metal exchanges.
Moreover, they are worried about when Glencore will end its altruism and bring back on its zinc output - as the current price is above the cost of production and therefore appears economic.
Glencore is basically what Saudi Arabia is to OPEC and oil. When Glencore decides to get back in play on zinc, it will have an impact on prices, depressing them again.