London (Platts)–19Feb2014/934 am EST/1434 GMT Macquarie Bank Wednesday said it doubted recent data from the International Lead Zinc Study Group indicting that demand for zinc metal may have outstripped production last year, and suggested instead that production beat demand.

Global refined zinc demand outstripped supply by 60,000 mt in 2013 following six successive years of surplus, according to preliminary data released January 17 by ILZSG.
«Inventories held in the London Metal Exchange, Shanghai Futures Exchange and Chinese State Reserve Bureau (SRB) warehouses — together with those reported by producers, consumers and merchants — decreased by 314,000 mt to total 1.9 million mt,» the statement read.
However, Macquarie analyst Stefan Ljubisavljevic said zinc metal consumption data from the group, «is overstated, as ILZSG report apparent consumption, which incorporates only changes to reported stock holdings. We feel that a certain portion of this ‘consumption’ has just moved into unreported stock holdings.»

e noted that LME inventory in Antwerp has dropped by close to 190,000 mt since the middle of 2013 «for example, which we think has gone into off-exchange financing rather than to the commercial market. Meanwhile metals financing trade in China was also active in 2013, mainly in copper but also in zinc. Therefore, we think global real consumption grew by a more modest — but still strong — 4.3% on year in 2013, with Chinese real demand growing 7.5%.»
On Wednesday, overall zinc stocks in LME-registered warehouses dipped 3,525 mt to 795,050 mt.
Still, the fact that output beat demand in 2013, in Macquarie’s view, is not reason to turn bearish as constrained zinc mine supply going forward is the primary reason Macquarie is actually bullish on the outlook for zinc.
Looking at the recent ILZSG numbers Macquarie said that, «the main reason we are positive on the medium-term prospects for zinc is that mine supply growth has fallen significantly, as illustrated in the 2013 ILZSG numbers [China +3.5% on year, ex-China -0.3% on year]. Ex-China mine supply growth is likely to remain constrained going forward as more ex-China mines reach end of life, while most of the planned replacement projects do not look feasible at the current time.»
Ljubisavljevic said that a lot «will come down to how successful Glencore is in ramping up its McArthur River and Mount Isa assets in Australia, while Chinese mine output remains the unknown.»
He added that, based both on anecdotal evidence and local market information, «we are of the view that most of the Chinese mine shut-downs are the result of poor economics and/or financing issues. In essence, we think medium-prices need to move higher to encourage this output back into the market or to make the ex-China projects viable once again.» Three-months zinc was spot bid on LMEselect as of 1300 GMT at $2,071/mt having closed the Tuesday kerb session at $2,068/mt.
January 2 — the first trading day of 2014 — zinc opened at $2,060/mt and hit a high during the session of $2,103/mt.
–Ben Kilbey, ben.kilbey@platts.com
–Edited by James Leech, james.leech@platts.com