Industrial metals: Tight markets for zinc and lead

After the International Lead and Zinc Study Group (ILZSG) held its spring meeting at the end of April and subsequently presented updated estimates on the market situation of zinc and lead, it published its monthly data on supply and demand at the beginning of the week. However, this was only a look in the rear-view mirror and did not lead to large price swings. According to the ILZSG data, the global zinc market was almost balanced in the first quarter (negligible supply surplus of 11 thousand tonnes). In the corresponding period of the previous year, the market was still oversupplied by 108 thousand tonnes. The fact that the surplus was reduced was equally due to lower supply and higher demand.

Supply is limited by the ongoing production cuts due to high electricity prices, especially in Europe. The global lead market was undersupplied in the first quarter (supply deficit of 23 thousand tonnes). In the comparable period of the previous year, supply and demand were still in balance. Supply fell twice as much as demand during the period under review. Both markets - zinc and lead - have thus tightened noticeably recently. ILZSG expects a high supply deficit on the zinc market this year, while the lead market should be slightly oversupplied. From a purely fundamental perspective, this should support the zinc price in our view. The lead price, on the other hand, should hardly benefit. After its sharp correction from mid-April onwards (around USD 1,000 or 22% in 3½ weeks), the zinc price has caught up in recent days and at times recovered to over USD 3,700 per tonne yesterday. After somewhat smaller losses in this period (16%), the lead price also traded higher again at temporarily over USD 2,100 per tonne.

Source: Commerzbank Research, Photo: Fotolia