The state of play is a metal in severe deficit - I.e there is...

The state of play is a metal in severe deficit - I.e there is not enough supply of zinc concentrate to meet the current demand of zinc concentrate. This is clearly evident to anyone watching the market closely. But please see below: 

- First, zinc LME stocks are at 10 year lows with a little over 100,000 tons in storage. 5 years ago this level was in excess of 800,000 tons. Further to that "Excluding metal earmarked for physical load-out, LME inventory is only 58,575 tonnes, as low as it has been since 2007, when zinc traded at record highs above $4,000 a tonne." https://www.cnbc.com/2019/02/06/reuters-america-rpt-column-as-price-hits-seven-month-highs-it-may-be-time-to-rethink-zinc-andy-home.html

- Every time some zinc pops up, its quickly sold and the LME stocks hit a fresh low - please see chart below: 

- Analysts at research house Wood Mackenzie expect another year of refined metal shortfall, with stocks declining to "exceedingly low levels" and raising the potential for a price recovery back to last year's highs. ("Zinc: Things to look for in 2019", Jan. 28, 2019).

- China's production of refined zinc fell by 4.6 percent last year in what was the steepest decline in output since 2013, according to state research house Antaike. This may be a result of higher zinc prices early last year. 

- Interestingly, higher TC charges could acutally be a boon for the zinc price and see Chinese smelters ramp up their buying which will may the shortage of zinc concentrates even more sever. "Treatment charges, which is what a smelter charges a mine for converting concentrates into refined metal, have shot up from close to zero this time last year to $210 a tonne, according to Shanghai Metal Market .Everyone is expecting Chinese smelters to lift production this year as conversion margins improve." I.e demand for zinc con's will rise, so too will the price.

- ANOTHER YEAR OF DEFICIT? - Wood Mackenzie's base-case scenario is for Chinese smelter output to rebound, but not enough to process the amount of available mine concentrate.The research firm's forecast is for a growing surplus of concentrates but another year of shortfall in refined metal, even assuming "very modest consumption growth". Note: I think they are underestimating bottle necks at mines and actually turning the production on quick enough to ease the shortfall in zinc concentrates. 

My view is Zinc will test fresh highs this year, before a modest decline to more sustainable levels. Overally I remain very bullish on zinc and NCZ>