Zinc: You Snooze, You Lose!

You can’t spell “zinc” without the letter “z,” and you might think this topic could give you a case of the ZZZs and put you to sleep. But do NOT snooze on this! There is an opportunity for investors in zinc, which is limited in supply, hard to purify and in high demand.

Heck, we keep finding more uses for zinc. Millions of Americans pop zinc lozenges at the first sign of a cold. Now, research suggests the mineral might help with COVID-19, too.

Researchers in Spain found that hospitalized COVID-19 patients with low blood levels of zinc tended to fare worse than those with higher levels.

“Lower zinc levels at admission correlates with higher inflammation in the course of infection and poorer outcome,” said a team led by Dr. Roberto Guerri-Fernandez of the Hospital Del Mar in Barcelona.

One U.S. expert said the finding makes intuitive sense. “It has long been thought that zinc bolsters the immune system,” says Dr. Len Horovitz of Lenox Hill Hospital in New York City.

Still, the finding can’t prove cause and effect, and the study group was relatively small.

In any case, this benefit shouldn’t be surprising, as zinc is an essential nutrient. (And if you like oysters, you’ll be pleased to hear that three ounces contain a hefty 673% of the recommended daily intake.)

You need to be careful, though. Numerous reports of anosmia (loss of smell) have been associated with the use of zinc-containing nasal sprays.

But zinc’s uses go far beyond human health.

Brass — which is an alloy made from zinc and copper — has been smelted for millennia. And metallic zinc itself has been purified since 1300 A.D.

Today, the metal is primarily used for galvanization, in which a protective coating of the metal is applied to anything prone to corrosion, such as iron or steel. This is done through electroplating or just dipping an item in molten zinc.

Zinc is also used as anode material for alkaline batteries.

An alloy with lead and tin results in solder. Its low melting point makes it perfect for joining electrical components and other metallic parts.

Zinc oxide (ZnO) is used in paints, batteries, plastics, cosmetics, soap, pharmaceuticals, inks and rubber products.

Zinc sulfide (ZnS) has a pretty cool property. It glows in the dark when exposed to ultraviolet (UV) light, electrons or X-rays, which makes it good for fluorescent lights, TV screens and luminous watch dials.

And zinc chloride (ZnCl2) actually protects wood from insects and decay.

Clearly, zinc is crucial for both construction and electronics.

Expanding global demand for galvanized steel, zinc alloys, diecasts and other zinc products should push prices much higher.

Especially as the United States, China and other countries embark on major infrastructure projects over the next several years and as the auto industry recovers.

As I said, there’s a limited supply of zinc, and purifying it is a challenge. (At the temperature zinc is released from its ore, it immediately vaporizes. If the furnace isn’t sealed tight, the gaseous zinc reacts with air to form zinc oxide.)

Couple that with rising energy costs and higher zinc prices are dead ahead.

So, as an investor, what’s the best way to play this?

Bullion is the most direct way to trade the metal. But storage costs and a low value-to-weight ratio make holding physical zinc impractical.

Trading zinc futures on the London Metal Exchange is another option.

But I recommend the Invesco DB Base Metals Fund (NYSE: DBB), an ETF which tracks not only zinc but also aluminum and copper prices. (Aluminum and copper are also used in batteries for electric vehicles.)

You can also buy shares in companies with significant exposure to zinc:

Teck Resources Ltd. (NYSE: TECK) is a large Canadian-mining company that explores and develops mining projects worldwide, with zinc production representing a significant portion of profits. Also, the company happens to own the Red Dog mine in northwest Alaska, the largest zinc mine in the world.

BHP Group (NYSE: BHP) is also a major player in zinc. It’s a multinational mining, metals and petroleum company headquartered in Melbourne, Australia.

U.S.-based Hecla Mining Co. (NYSE: HL) engages in the acquisition, exploration and development of mineral properties worldwide. It’s a producer of both base and precious metals.

Canada’s HudBay Minerals Inc. (NYSE: HBM) is an integrated mining company focused on the production of precious and base metals in North and South America.

Whether you want broad exposure or more potential risk/reward with an individual company is up to you.

But if you snooze, you may lose.

All the best,

Sean

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