The global base metals market is underperforming in the face uncertainty in the global economy. In particular, factory activity in China is weak and Germany factory orders just added to the growing fear of an impending recession.
Zinc prices down
A slowing global economy is to blame for the sideways meander of the prices of base metals. To be sure, the US China has done little to inject confidence in a change in direction of global economy growth. But analysts predict that soft US jobs data might persuade US President Trump to tone down and pursue an amicable deal with China.
In light of this, three-month base metals prices at the London Metal Exchange were in the red in the Friday morning trading sessions. Broadly, the prices had dropped by an average of 0.3%. In particular, Zinc was down 0.3% to $2420.5 per ton.
The same is true for the prices on the Shanghai Futures Exchange. With the exception of August aluminum which was up by 0.4%, the broad market was down. Particularly, August zinc slid 1.3%, which turns out to be one of the largest margin slumps.
If Zinc and the broad base metal prices close Friday in the red, this will mark a trend which began entrenchment on Thursday July 4, 2019. To be sure, benchmark zinc slid 1% to settle at $2,425 per ton on Thursday amid a supply glut from China. If the trend continues, the benchmark zinc price is on track to breach the five-and-a-half low of $2,412 established in June.
Zinc is under threat in Canada
According to the International Lead and Zinc Study Group (ILZSG), the global zinc market is on the verge of closing the existing supply deficit. During the first four months of 2019, ILZSG noted that the deficit was in the region of 97,000 tons.
But Chinese output has grown substantially in the last two months with the country producing 7.4% more zinc in May 2019 than the same time last year. Further, the global zinc production is holding strong, being at around 13.5 million tons annually by the most recent estimations.
Canada too could be on the track to ramp up its zinc production. This growth could be lifted by upcoming mining projects by miners. To be sure, Shine Minerals Corp. (CVE: SMR) is among those miners who are set to boost Canada’s zinc output.
In a recent press statement, Shine Minerals confirmed the mineralization of the Borys Lake Main Zone. The company revealed seven holes which were under study were confirmed to hold up to 21.3% Zinc. If the mining process begins, this could mark a comeback by miners in an industry which has faced mine closures and other problems in the past.
But all could not be well in Canada’s zinc market if a recent report is acted upon. Dubbed Draft Screening Assessment for Zinc and its Compounds, the report sought to examine the harmful nature of zinc to the environment.
The broad conclusion of the report was that the metal is especially harmful to aquatic life. As such, the government could add the metal to schedule 1 of the Canadian Environmental Protection Act (CEPA). In this case, the industry will face tough regulatory measures which could harm productivity.