BNamericas reported that the zinc metal market is in the process of shifting from oversupply to consecutive years of deficit.

Mr Steve Hayes CCO of Canadian miner Breakwater Resources said that "The zinc concentrate market historically a leading indicator of the zinc metal market, remains reasonably tight. There is insufficient zinc concentrate available globally to fully satisfy smelter capacity. As a consequence, benchmark treatment charges or processing fees charged by smelters have declined by roughly 16% for 2011. This continues the trend whereby zinc mining companies are realizing more for their zinc concentrates at the expense of zinc smelters.

Mr Hayes said that spot zinc treatment charges are currently trading at more than USD 100 per tonne less than the benchmark, providing a further indication of the tightness in the concentrate market. The zinc metal market would not appear to be as tight at the moment. LME stocks have risen to the point where at 830,000 tonnes they are high by historical standards.

However, the current market is stronger than it appears. We understand there has been an element of destocking in metals inventories in China contributing to more visible inventories. Further, the zinc metal premiums have remained firm suggesting a degree of competition amongst buyers for available metal. Sovereign debt concerns in Europe, the prospect of higher interest rates in emerging markets and less accommodated monetary policies in developed economies have recently weighed on metal prices.

He said that in spite of these concerns, we understand that fund flows into commodities continue. Barclays Capital has recently estimated that commodity assets under management are in excess of USD 400 billion. So moving forward we continue to anticipate improving zinc concentrates and zinc metal markets.

(Sourced from Business News Americas)