How to Invest in Zinc
Zinc, also known as spelter, is a metallic element which is used all across modern communities. Aside from being an important industrial metal, the commodity is also an important mineral to the human body, as a zinc deficiency can cause major problems in the human body. The metal is typically found with other base metals, like copper, and is also a large component in the Earth’s crust. Estimates of zinc resources total to approximately 1.9 billion tonnes worldwide, making this important metal an abundant resource. In fact, zinc is the fourth most popular common metal in use, with a global annual production of around 10 million tonnes.
Zinc occurs in five different isotopes in nature, with the metal being one of the most commonly used in the world. In fact, roughly 350 million tonnes of the metal had been extracted through out history until 2002, and it is estimated that about one third of that still remains in active use today. Roughly 70% of the world’s zinc comes from directly mining it, while the remaining amounts of the metal come from recycling secondary zinc. Producing this metal includes, extraction, grinding the ore to separate other minerals, and depending on what it will be used for, further processes may be used. Currently, countries along the Pacific Rim such as China, Australia, Peru, and the U.S. dominate zinc production although the product is produced in a number of other countries in smaller quantities as well.
Investors looking to gain exposure to zinc have a few options. Although no option for physical zinc exposure exists, ETFs that hold the metal could be on the way in the near future. In terms of equity exposure, it is often difficult because few companies are a pure play on zinc exposure and mine a host of base metals instead although there are a few companies that do focus on the industrial metal exclusively. Investors do have the option of looking at futures contracts of the metal which can be bought on the London Metal Exchange or by purchasing a base metal focused ETN. Unfortunately, there aren\’t any pure play options for zinc futures at this time.
Ways to Invest in Zinc
There are 2 ways to invest in Zinc: ETFs and Futures. Click on the tabs below to learn more about each alternative.
What are Zinc ETFs?
Zinc is commonly included in industrials metals ETFs that employ a basket approach, offering exposure to a number of commodities such as copper, lead, and nickel. Zinc accounts for about 15% of the index to which the iPath Dow Jones UBS Industrial Metals ETN (JJM) is linked, and makes up about a third of the index replicated by the PowerShares DB Base Metals Fund (DBB). U.S. investors do not have any pure play zinc ETP options available, though international investors may. ETF Securities offers a zinc ETF that achieves exposure through futures contracts, as well as leveraged and inverse versions.
What are Zinc Futures?
Zinc futures are traded on the London Metal Exchange under the contract code ZS. The lot size for LME zinc futures is 25 tonnes, with a tolerance of +/-2%. The physical specifications of the contracts call for zinc of 99.995% purity (minimum) conforming to BS EN 1179:2003.
Zinc futures traded on the LME are priced in dollars and dents per tonne, and clearable currencies include the U.S. dollar, yen, pound, and euro.
Additional sources of information on LME Zinc futures: