IMC-MCX IPF│ Commodity Market Fundamentals Forum 2019

LME-SHFE Zinc Warehouse Stocks & LME Price trends for CY-18 Source: Fast Markets Key observations: This year we have seen a continuous decline in LME-SHFE warehouse stocks at their lowest levels for ten years due to the prolonged backwardation in Zinc LME prices which prompted parties to sell off the stocks they were holding. Also, due to lower Chinese smelter production stocks from SHFE warehouses were also drawn down despite open arbitrage for a period.

Contango/Backwardation – Zinc & Lead for FY-19 Source: Fast Markets Key observations: The delayed output from the new mine projects resulted in extended deficiency of concentrate in the market. As a result, the refined metal market stayed tight throughout the period which lead to the extended backwardation scenario. At the same time many Chinese mines and smelters have announced reduction in their output due to environmental sanctions

Asian Premium Trends Zinc for FY-19 Source: Fast Markets A relatively stable premium trend for SE Asian ports and warehouses was disturbed by opening of arbitrage (SHFE-LME). After the arbitrage was negative, the Asian premiums started coming back to normal. Most Zinc LTCs in Asia have seen only marginal increase with respect to last year with consumers able to get regular fresh supplies of material

Global Demand-Supply Balance ( CHINA vs ROW ) Source: Wood Mackenzie Source: Wood Mackenzie

Concentrate Supply Scenario Delays in bringing new capacity online alongside strict environmental controls continue to act as a significant headwinds for Chinese miners, which Antaike estimates dropped by 3.3% year on year to 4.16 mt in 2018. The ramp up of new mines such as New Century and Gamsberg might not proceed as smoothly as we forecast. The forecast for Century tailings in 2019 has been reduced from 150kt Zn to 120kt Zn on an assumed slower ramp-up following metallurgical issues in Q4 2018. Forecast production has been reduced at Bracemac McLeod in Canada by 10kt and 20kt Zn in 2019 and 2020 respectively, with a reduction of 5kt and 10kt at Kidd in these years, based on recent operating performance. The forecast for Teck's Pend Oreille mine in the USA has also been reduced by 15kt Zn in 2019. In Kazakhstan, the forecast for Zyranovsk and Ridder has been reduced for a total 10kt Zn and 15kt Zn in 2019 and 2020 to reflect an expected fall in mining rate. Mines Reduction in output New Century 120 KT Bracemac 20 KT Kidd 5 KT Pend Oreille - Teck 15 KT Zyranovsk 10 KT Ridder 15KT Source: Wood Mackenzie

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