Recent surveys of investment fund managers indicate rising bearish sentiment, as forecasts of oversupply cast a shadow over these industrial metals. Combined with fundamental challenges in key markets like batteries and galvanising, traders and investors are exploring strategies to capitalise on potential downturns.

Survey Results Indicate a Shift to Pessimism

A recent survey of major commodities fund managers shows 63% expect zinc surplus (~370,000 t) by year-end 2025, and 58% foresee lead surplus (~210,000 t). This follows post-pandemic tightness driven by electrification and infrastructure, now reversing due to rising mine output and soft demand.

Supply-Demand Drivers in Battery and Galvanising Markets

Lead and Batteries

Lead-acid batteries remain vital for vehicles and UPS systems, but production is outpacing steady battery demand. China, responsible for 43% of global lead, is ramping primary and recycled output. Meanwhile, EV-driven lithium-ion growth is eroding lead demand long term.

Zinc and Galvanising

Zinc supports galvanised steel in construction and automotive sectors. However, residential construction slowdowns in the US and China, driven by high rates, have cooled demand. New mine supply from Kazakhstan, Namibia, and Canada further adds to oversupply pressures.

ETF and Equity Trade Implications

Metal ETFs

Bearish traders target commodity ETNs like the iPath Bloomberg Industrial Metals Total Return ETN to hedge lead and zinc exposure. Others pivot to diversified metal ETFs overweight in aluminium, nickel, and other metals benefiting from EV and renewables.

Mining Equities

Miners such as Glencore and Hindustan Zinc are focal points for hedges or short positions in lead and zinc. Investors should isolate pure-play producers to avoid dilution of exposure by stronger base metals like copper and nickel in diversified miners’ portfolios.

Pair Trade Suggestions

1. Long Aluminium, Short Zinc

Aluminium benefits from EV and solar demand, while zinc faces headwinds from a weaker galvanising sector—ideal for a relative performance trade.

2. Long Recycled Lead, Short Primary Lead

Recycled lead’s cost and ESG advantages support its growth, creating an opportunity to long recyclers and short traditional primary producers, reflecting sustainability trends.

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