If you’ve got a modern car then you’ll already know all about zinc. It’s the magic ingredient in galvanised metal and it stops cars from going rusty. China is the world’s largest zinc producer, producing 46% of the world’s supply in 2021.
With volatile stock markets, investing in metals is becoming increasingly popular, and zinc is no exception. The price has risen since the beginning of the conflict in Ukraine. But what’s the deal if you want to invest in zinc?
In this guide, we take a look at how to invest in zinc and answer common questions like “is it worth investing in zinc stocks?” and “Why are zinc prices so high?”.
If you want to invest in zinc, you have several options. You can invest using a share dealing account, Stock and Shares ISA or a pension scheme.
Once you’ve picked your investing platform, then you can get onto the fun bit and start researching which fund, commodity or stock to buy.
Here are the steps you need to take to set up a share dealing account:
ETFs or exchange traded funds can help you to spread your investment risk by diversifying your investment. There are two types of metal ETF: some invest in metals futures, tracking an underlying precious metal index, and others invest in a range of metal mining companies.
Here are some pros and cons of investing in zinc through an ETF:
Compare brokers to buy zinc ETFs
Investing in zinc stocks is one of the simplest ways to invest in zinc.
Compare brokers to buy zinc stocks
Investing in zinc futures is a risky business. You’ll be committing to buy zinc in the future for a set price. If prices go up, then you’ll make money, but if they go down you’ll lose out because you’re still committed to buy at the agreed price. You may be able to buy futures through your share dealing account.
Here are some pros and cons:
Compare brokers to buy zinc futures
Teck Resources Limited is a Canadian-based mining company with operations in mining and mineral development, including coal, copper, zinc, and energy. It’s one of the biggest zinc producers in the world and its Alaskan Red Dog zinc mine is one of the largest zinc mines on the planet.
Teck Resources has enjoyed stellar performance in the last 5 years. This is partly due to strong financial performance as the company has outperformed its earnings estimates in six of the past seven quarters.
However, it’s not been an easy ride. Like many mining shares, Teck has seen huge price volatility as well as strong performance in the last few years. In March 2020, the share dropped to roughly $6 per share during the covid-induced market plunge and has since climbed to a high of $39.20.
As of 17 March 2022, Tech’s share price is up 52.2% in the last 6 months and up 77.3% in the last 5 years. Teck Resources Limited has a market cap of $22.3 billion and a dividend yield of 0.9% in 2021.
Compare brokers to buy COMPANY shares
South32 may sound like a boy band, but it’s actually one of Australia’s biggest mining companies. It’s listed on the Australian Securities Exchange with secondary listings on the Johannesburg and London Stock Exchange. South32 has operations in Australia, Southern Africa and South America and mines a range of minerals including aluminium, coal, manganese, nickel, silver, lead and zinc.
The Perth-based mining company reported a 1,847% increase in profits after tax for the half-year up to December 2021 as well as achieving record operating margins.
As of 17 March 2022, the share price is up 50.0% in the last 6 months and up 50.7% in the last 5 years. The mining giant has a market cap of $17.6 billion and shareholders enjoyed a dividend yield of 3.4% in 2021.
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Vale is a Brazilian mining company with global operations in around 30 countries. The company extracts many metals including zinc, manganese, nickel, copper, coal and iron ore. Vale also runs a logistics operation to transport their raw materials via railways and ships.
As of 17 March 2022, the share price is up 14.8% in the last 6 months and up 84.8% in the last 5 years. Vale currently has a huge market cap of $102.0 billion and a very generous dividend yield of 14.0%.
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Zinc prices have been extremely volatile during the last few months. On 23 March 2020 the zinc price was 1,773 per tonne, but it climbed during 2021, partly due to a drop in supply during the Covid crisis. The market was 192,000 tonnes in deficit during 2021, meaning that less zinc was produced than consumed.
On 21 February 2022 the price was 3,599 per tonne and it soared to a peak of 4,247 on 7 March at the beginning of the conflict in Ukraine. Since then, prices have dropped back and as of 16 March 2022 the zinc price is 3,782 per tonne.
Experts warn that future price rises are possible as increasing energy costs have a knock-on effect on the costs of zinc mining.
Around 60% of the world’s zinc is used to galvanise other metals, to prevent rusting. Galvanised steel is used for many products including cars, street lamp posts, safety barriers and bridges.
Here is a summary of the main uses for zinc:
44% of people we surveyed said they already invest in zinc stocks or would consider investing in zinc stocks.
| Response | |
|---|---|
| I would consider it | 38.75% |
| Not sure | 32.1% |
| I wouldn't consider it | 23.62% |
| I already invest in this | 5.54% |
In times of stock market volatility, investors often turn to commodity investing. Investing in commodities, like zinc, is seen as a safe haven from the white-knuckle ride of the stock market. However, like many things in investing, the truth is more complex. In fact zinc prices are also extremely volatile and many smaller zinc producing companies have a strong risk of failure.
However, holding commodity investments like zinc can be useful as part of a balanced portfolio. Commodity prices have a different growth cycle to equities so they may offset some of the stock market’s volatility. Just make sure you do your investment research carefully before taking the plunge.
All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
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