Zinc: Forgotten Metal Set to Shine
Source: MoneyWeek, Tom Bulford (4/14/10)
"Zinc doesn't have the glamour of gold. . .But that's all about to change."
Within the next five or six years, I expect us to see a huge upsurge in demand for the metal. Today I'm going to explain why that is.
Talk about zinc and its sister metal, lead, and the eyes of the average fund manager will begin to glaze over. But I think these fund managers are missing a big story—one that the shrewd investor can turn to his advantage.
You see, year by year, the level of supply from the world's zinc mines is dropping. According to analysts at Credit Suisse, this year, supply and demand for zinc will be pretty well balanced. But cast forward to 2016 and this balance is going to disappear. Credit Suisse forecasts that global demand will be 16.6kts. But the world's mines will be able to produce only 10.2kts.
This is clearly neither a comfortable nor a sustainable position for the industry. Something is going to have to give. So what's going to happen?
The hidden hand of the free market is going to adjust the price upwards, choking off demand and encouraging supply. But Credit Suisse doubts whether this can be achieved without a rapid hike in the price of zinc.
Although the climate for mining ventures is recovering from the dark days of the credit crunch, mining executives are still reluctant to commit to new projects. As a result, says Credit Suisse, "CEOs will probably need to see a significant price spike to agree to fund them."