Zinc inventories increased significantly in the first two months of 2009. LME zinc inventory increased from 253,475 t to 351,800 t as of February 24. During the same period Shanghai Warehouse inventories have remained relatively static at about 63,000 t. Selwyn Resources, the mining company who compiled these statistics, says it is evident that zinc inventory build-up began in earnest in December 2008 and accelerated in January 2009.

LME zinc inventories rose rapidly from mid-January to mid-February; however, the pace of increase now appears to be slowing. In the past 10 days there have been several significant down days in LME zinc inventories. This levelling off of inventory build-up on the LME corresponds to an increase in cancelled warrants from 8,000 to 23,000 t, signalling further withdrawal of zinc stocks.

Selwyn belives that it is too early to say if inventories have peaked. “LME inventories tell us very little about what is happening in the hidden inventories of smelters and metal traders. What is clear is that people have started buying zinc again and perhaps the rebuilding of fabricator inventories has begun,” it commented.