I found this article interesting because it confirms that among metal dealers and producers that stock are pretty tight at the moment. It's a bit hard for the average stock investor to understand this dynamic when they look at LME supply and see 900,000t. So allow me to illustrate the point.
Below is a detailed breakdown of zinc inventory. The red locations are where zinc needs to be to be ordered by the strongest manufacturing regions around the world. The total zinc available in these locations is at the bottom there - 130,225.
Now, US traders are also finding supply tight, which is odd given that of the total LME stocks, 697,000t are stored in the US. But if you have a look at US manufacturing regions there isn't much available. Outside of Detroit and Chicago, where there is a heavy concentration of car manufacturing etc, there isn't much supply. The stock sitting in New Orleans 580,000t is mostly tied up in 2-3 year financing deals by Glencore - almost 550,000t. With interest rates at around 0.25% in the US, Glencore can easily afford to buy the zinc and park it a low cost warehouse until prices rise. In effect, this is creating the shortage the article above eludes to. It's really manipulation at its finest but it means limited downside to zinc prices for the foreseeable future. Amateur journalists that point to headline zinc stock numbers have no idea what they are talking about. Glencore see large mine closures in 2013 and are simply reserving inventory for the future. Very clever indeed.
KZL Price at posting:
17.0¢ Sentiment: Buy Disclosure: Held
