Zinc prices on the rise as mines get tapped out

New York

TUCKED away in the remote limestone plateaus of northern Australia, the owners of a massive zinc mine have begun preparing its transition back to cattle-grazing land.

For the miner, China's MMG Ltd, that hurts because replacing the tapped-out mine - which is responsible for 4 per cent of the world's zinc output - with a fresh source of the metal has proved to be elusive. For commodity investors who have grown accustomed to the emergence of supply gluts sparking selloffs in everything from copper to wheat, it's a boon.

Zinc, unlike those other raw materials, is rebounding, having posted an 8 per cent gain over the past three weeks that stemmed an eight-month slide.

That's largely because the fate of MMG's mine highlights a growing new trend in the zinc market. From Africa to Ireland, mines that have produced the metal for decades are now tapped out. Morgan Stanley estimates that by 2017, more than 1.2 million tonnes of annual mined supply will be taken out of production. That's more than the US uses in an entire year. Tighter supplies are prompting banks including BNP Paribas SA and Goldman Sachs Group Inc to forecast higher prices for the metal that's used in steel car parts, brass plumbing fixtures and sunscreen. Demand exceeded output by the most in nine years in 2014 and the deficit will almost double next year, according to data from the International Lead & Zinc Study Group and B…