A Brief Overview: Investing in Zinc

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Used in all modern communities, Zinc, sometimes known as spelter, is an important industrial metal. Aside from that, zinc is a mineral that is crucial to the human body. Those struggling from zinc deficiency will experience major problems in their body, such as impaired immune function, delayed growth, and for men, reduced circulating testosterone.

Typically found alongside other base metals, like copper, Zinc makes up a large part of the Earth’s crust and it is estimated that zinc resources total to roughly 1.9 billion tons worldwide. In fact, this metal is such an important resource that it is the fourth most popular common metal, contributing to a global annual production of roughly 10 million tons.

Occurring in five different isotopes in nature, with metal as the most commonly used, around 350 million tons of the metal have been removed throughout history until 2002. Currently, it is estimated that one-third of that number is still active.

With nearly 70% of the globe’s zinc coming from mining, the remainder comes from recycling secondary zinc. To produce zinc, the process includes the following: removal and then grinding the ore to separate other minerals. Additionally, depending on what the metal will be used for, supplementary processes may be required. Even though zinc is produced in a number of countries in small quantities, the zinc mining companies that dominate zinc output are in the following countries: China, Australia, Peru, and the United States.

For those interested in zinc supply and gaining exposure to the metal, you have options. Despite there being no option for physical exposure to zinc, exchange-traded funds believe the metal could be well on its way in the near future.

In regards to equity exposure, this is often found to be difficult. In addition to ETFs, investors have the option of looking at futures contracts of the metal. If this interests you, these futures contracts can be bought on the London Metal Exchange or through purchasing a base metal focused exchange-traded note.

How to Invest in Zinc

Currently, there are 2 ways of investing in Zinc: Exchange-Traded Funds and Futures.

Zinc ETFs: What Are They?

Commonly included in industrial metals ETFs, which offer exposure to numerous commodities, Zinc accounts for roughly 15% of the index in which the iPath Dow Jones-UBS Industrial Metals ETN is linked. Plus, zinc accounts for about a third of the index replicated by the PowerShares DB Base Metals Fund (NYSEARCA:$DBB). Unfortunately for investors in the United States, there is not a pure-play zinc ETP option available, however, international investors may have this option.  Additionally, if you are looking for a zinc ETF which achieves exposure via futures contracts, check out ETF Securities.

Zinc Futures: What Are They?

Traded on the London Metal Exchange under the ZS contract code, the lot size for LME zinc futures is 25 tons. The tolerance is +/-2%. Keep in mind that there are physical specifications of the contract which call for zinc of 99.995%. This conforms to BS EN 1179:2003.

On the London Metal Exchange, zinc futures priced in dollars and cents per ton. For the LME, clearable currencies include the following: the U.S dollar, yen, pound, and euro.

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