Zinc prices up 2.5% at $2,457.20, reaches 5-year-high due to anticipated tight supply

The closure of Glencore’s Black Star Open Cut mine in Queensland is anticipated to make global supply of zinc tighter. This caused price of the benchmark zinc untraded contract to rise 2.5 percent to US$2,457.50 ($3,233.33).

It earlier reached the five-year high of US$2,479.50 (A$3,259.32) established in August 2011, The Australian reports. Zinc became one of the best-performing commodities in 2016 among industrial metals due to its benefitting from supply shortages and anticipated tightness in the concentrate market.

In a note in late October, Goldman Sachs said in a note that it expects the zinc to do better than aluminium and copper in the next six to nine months. Also on Monday, aluminium prices reached a 15-month high as LME aluminium closed higher by 1 percent at US$1,735 (A$2,280.38) a tonne because of the increasing cost of production due to higher energy and raw material prices in China, the top producer of the commodity.

Glencore shuttered permanently the Black Star Open Cut mine in Queensland, part of the Mount Isa Mines complex, because the company has mined out its existing reserve, placing the facility on care and maintenance. Since Glencore opened the mine in 2004, it has produced around 40 million tonnes of ore and 1.75 million tonnes of contained zinc, Reuters reports.

Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York, explains, “The combination of the sharp aluminium rally, Glencore shuttering the venerable Black Star zinc mine and continued strength in coking coal and iron ore saw stops triggered above $US2,420 and sparked fresh momentum buying.” He adds that although the volume was quite strong, the move was likely worsened by the start of LME Week “where much of the market is typically off the desks.”