Glencore’s boost to zinc prices loses momentum

AFTER its biggest leap since at least the 1980s, zinc has tumbled back down to earth.

It jumped more than 10 percent after Glencore, the biggest miner of the metal used to galvanise steel, said on October 9 that the company would cut production by about a third rather than sell it cheaply. Less than a month has passed and prices are back where they began. “Here we are a few weeks later and we’ve pretty much erased all those gains,” Mike Dragosits, a senior commodity strategist at TD Securities in Toronto, said.

Zinc traded at $1 682.50 (R23 174) a ton by 11.37am in London yesterday, little changed from $1 667 at the October 8 close. Prices rose as much as 12 percent on October 9, the biggest advance since at least 1989, with Glencore’s announcement suggesting more producers may curb supply.

Zinc has fallen 23 percent this year as slowing Chinese economic growth hurts demand. China’s factory gauges signalled on Monday that manufacturing still has not bottomed out.

“For now, all the headlines are all quite negative and the sentiment is still certainly quite negative for China,” Dragosits said. “That’s impacting the price action we’ve seen ever since that zinc production cut headline from Glencore.”

Glencore, up 2.2 percent yesterday, has declined 15 percent since reaching an intraday high of 139.70 pence (r29.70) on the day of its announcement. The company has lost 60 percent of its market value this year.

Chief executive Ivan Glasenberg, after repeatedly criticising competitors for not curbing supplies of raw materials such as iron ore even as prices slump, has seen some rivals gain from his company’s boost to zinc prices, but declineD to cut their own output. – Bloomberg