Zinc prices are trending high, which is great news for investors who have shares in zinc stock. With a surge of over 90% over the past 24 months, you would think that the growth period is done, but you would be wrong. The government plans to spend as much as $1 trillion on infrastructure development over the next decade, and this will continue to drive the demand for the mineral.
Here we’ll give you the rundown of what’s happening with Zinc, and some simple ways to add zinc stock to your portfolio.
Why is Zinc Having a Moment Right Now?
Zinc prices are skyrocketing, which is unusual because until recently it didn’t draw much attention from the investor community. Traditionally, it ranks behind other commodities like iron ore, copper, or aluminum due to their higher industrial demand. However, while it’s not required in the same quantities as these construction mainstays, Zinc is an essential metal in many building processes.
The steel industry needs zinc to galvanize the metal which protects it from weather and corrosion. If you want to produce brass and bronze, which are popular not only for their durability but also for their aesthetic value, you need Zinc to complete the process. It’s also a key ingredient in die-casting.
It has applications outside of the construction industry as well. Zinc can be applied to crops to increase their production and quality, and it’s also an essential nutrient in the human body and is added to supplements and foods to assist with disease prevention.
Supply and Demand
Investing in Zinc is a bit trickier than just searching for NASDAQ: Zinc and buying stock. In fact, if you do that, you’ll actually be investing in HorseHead Holding LLC, the parent company of American Zinc Recycling. Although this organization does have their foot in the door in the zinc business, rather than produce the material directly, their focus is on recycling electric arc furnace dust to create specialty zinc and zinc-based products.
If you want to invest in a company that trades on the major exchanges and both mines since and produces a significant amount of revenue from the production of the metal, you’ll have to get a bit more creative than just searching for the zinc symbol.
Here are three companies that have a foothold in the Zinc industry that are worth some serious consideration as an investment option.
One of the most significant zinc stock opportunities is through Teck Resources. As the third largest zinc producer in the world, the company earned 30% of their 2015 gross profit from the metal.
The organization operates three primary mines in North America and has two of the five largest zinc mines in the world. One of the best parts for investors is that Teck isn’t in any jeopardy of running out of material to mine anytime soon. They estimate that they have a reserve life of around 15 years if they continue at their current production rates.
Although the company isn’t actively investing in any projects that would grow their overall zinc output, it does have several opportunities in the pipeline that could stimulate growth down the road if there is a demand.
When you take into consideration all of these details, you paid a picture of Teck Resources as a way to meaningfully invest in Zinc for the long-term.
Another mining company that derives a significant amount of annual revenue from Zinc is Hudbay Minerals. Primary a copper company, they get about 20% of their profits every year from zinc, and that number is on the rise. Their zinc production is up over 35% since 2014 due to the rising demand for the minerals, and increasing grades at it’s two primary zinc mines.
Located in Manitoba, the Lalor zinc-gold mine has around 15 years of production left, and the 777 copper-zinc mine is another prime location for extracting the material.
The most substantial silver producer in the U.S., Hecla Mining also generates a considerable amount of income from zinc. It’s the third largest miner of zinc in the country through the outputs from their Greens Creek and Lucky Friday mines.
The company has seen an elevated zinc output over the past year, and they have plenty of room to continue growing. They’ve done some exploratory drilling at Greens Creek that unearthed significant zinc bands that haven’t yet been touched. Mixed in with a gold and silver accumulation in those same bands, Hecla has lots of options that will ensure they continue to grow and have the possibility lucrative year over year returns for investors.
Outside of investing in individual mining companies, you can purchase zinc stock through an ETF.
Exchange traded funds, or ETF’s are purchased through a brokerage firm on a stock exchange. You can buy them in a variety of asset classes like traditional investments, or for commodities like gold, iron, corn, and zinc.
Unlike mutual funds, you can buy, sell, or trade ETF’s all day, every day and you have more control over when you pay capital gains tax on your investments. However, the trading costs are typically a bit higher, and the sales take longer the settle than standard stocks.
While you can’t buy an ETF specifically in Zinc, you can look for companies that list the metal as one of their commodities. Two notable options are iPath Dow Jones UBS Industrial Metals ETN, and the PowerShares DB Base Metals Fund.
Stock Market Tips
If you’ve never purchased stock before, or if you’re looking for a few insider tips to make the most of you zinc investment, try using these tried and true strategies.
1. Decide How You Want to Buy, Sell, and Trade
There are lots of ways to get into the stock market game. One of the most popular methods is through online apps and stock brokers that allow you to make purchases, sell your stock, and initiate trades from your computer or mobile device. Do your research on potential companies to determine which is the best fit for you.
Before you get started, make sure you understand all the rules and read the fine print. Most brokers will have a minimum investment, will charge a fee per transaction, and will offer reporting and services to assist you with your purchases.
2. Select Your Stocks and Decide How Many Shares to Buy
Whether you’re investing in one of the zinc stocks, we discuss above, or you’re purchasing additional options to round out your portfolio, be sure to research the company ahead of time. You’ll want to take a look at the annual report from the group, study their past trends, and access other information available to stockholders on their website to ensure that this is a company worth purchasing.
3. Determine Your Order Type
There’s lots of fancy jargon when it comes to managing stocks, which can make this step a little confusing. If you’re using an app, they will help you with this process. Otherwise, the two most common types you’ll usually encounter are Market Order and Limit Orders.
Market Orders are essentially real-time sales transactions. This type means that you want to buy or sell the stock at the best available current market price, and the order will happen immediately and be fully filled. The only exception would be if you were trying to buy a majority number of the shares, which would set off a red flag that you are aiming for a hostile takeover of the company.
With a market order, you might find that the price you pay or receive from your stock may not match what you were quoted in the seconds before you made the transaction. The prices continuously fluctuate throughout the day, and in the time it takes for your request to go through, there might be changes. For that reason, a market order is best used for stocks that don’t ordinarily experience big price swings. If you’re considering buying into a more volatile company, there are better options.
Limit orders are a way to give you more control over the price that you buy or sell your stock. In this scenario, you provide your broker guidance on when to execute your order based on the cost of the stock. For example, if you’re buying into a company that’s experiencing an unexpected spike in value, you can direct your broker to sit tight until it drops back down to a more realistic price before they purchase your shares.
If you’re looking to buy into a volatile stock, or an option when the market is volatile, limit orders are the way to go.
The Bottom Line
Zinc is a commodity with lots of practical applications, and thanks in part to the infrastructure boom in the U.S., its value is on the rise. You can invest in Zinc stock by either grabbing shares from one of the prominent mining companies, or through ETF’s that include zinc as one of their primary commodities. Regardless of which way you choose, investing is simple, and anyone can do it with the plethora of online tools and brokerage options available.