China, the world’s largest zinc producer, also consumed 47% of the world’s production of 13,791,000 tonnes of the metal in 2015. About 60% of zinc produced is used for rust proofing steel in everything from auto bodies to suspension bridges, with the remainder used in alloys and a variety of other applications. Zinc has been out of favour, as it only entered the super-cycle late in 2006 when prices very briefly touched $2.08/lb. What has been regarded as a low price for zinc for more than a decade has discouraged exploration and caused some companies, such as Anglo American, to dispose of all zinc assets. The price of zinc has been fraught with a massive inventory overhang estimated at +2 million tonnes held at exchanges, by producers and consumers in 2012/13. Today, that estimate is 1.5 million tonnes, with the London Metal Exchange (LME) inventory dropping to 0.38 million tonnes from 1.2 million tonnes in 2012. In 2015, several mines closed permanently, reducing annual zinc tonnage, including MMG’s Century mine in Australia (500,000 tonnes), Vendata’s Lisheen in Ireland (175,000 tonnes) and Glencore, which removed 500,000 tonnes. Other suspensions reduced supply by an additional 200,000 tonnes. “Zinc has a strong uptrend behind it,” Andrew Silver, a broker at Triland Metals Ltd., said. “Prices are moving in advance of tighter fundamentals. Some of the fund money has come toward zinc. If demand holds up, the physical surplus will get eaten away.” Last month Goldman dubbed zinc the “bullish exception” among metals, highlighting its positive prospects in 2016 YTD, while Glencore plc, the biggest miner of the metal, says structural deficits are back. The price has surged 29% YTD 2016, and gains have outshone most other metals, rising at the start of the year from US$0.70/lb. to close June 2 at US$0.90/lb. The optimism stems from a forecast global deficit after mine closures and production cutbacks led to a lower supply of zinc concentrates. "The biggest risk to the bull story on zinc was always that China would ramp up production, partly because it's the only country that has the capacity," said Caroline Bain, senior commodities economist at Capital Economics in London. "I'd be surprised if they managed to fill the (deficit) gap because the environment for zinc mining and refining in China has changed." Chinese authorities have clamped down on small mines and refineries, while production has become very costly because of environmental regulations, she added. 2016 appears to be the dawn of the long-desired new price as the inventory overhang reduces and mine closures and suspensions take hold. Despite the robust price performance year to date, some naysayers are not so bullish. Analysts from Citigroup Inc., including David Wilson, say that it may take longer than expected for the emerging concentrates supply crunch to feed through to refined-metal markets. Zinc demand has remained muted, and total inventory, including metal that’s held off-exchange, is “likely to have a dampening effect on prices,” the analysts wrote. (Written by Peter Jones, Executive Vice President, Century Global Commodities Corporation)