What is this Zinc surplus people are talking about, I don't get it D:!
Go to LME or kitco.com, Zinc supplies are PLUMMETING, I've noticed Zinc go from 120k to 60k, the facts are speaking for themselves, its a pity that this stock and the whole Zinc story is dominated by speculating hacks.
Vishalt,
This is surplus the market is talking about....
ILZSG forecasts zinc market to shift to surplus next year
Metals Insider - 2007-10-09
The International Lead and Zinc Study Group (ILZSG) said it expects the global refined zinc market to record a supply-demand deficit of 47,000t this year before recording a
surplus of just under a
quarter of a million tonnes next year.
The forecast was made following a meeting last week of the Group’s Statistical and Forecasting Committee.
Global demand is seen rising by 3.0% to 11.38 million tonnes this year and by 5.1% to 11.96 million tonnes in 2008. Growth will largely be determined by China, where usage is expected to rise by 8.8% this year and by 12.1% next year.
Mine supply is expected to grow by 7.4% to 11.18 million tonnes this year and then by a faster 9.5% to 12.24 million tonnes next year.
Global refined zinc metal production is forecast to increase by 5.9% to 11.32 million tonnes this year and by 7.8% to 12.2 million tonnes in 2008.
The ILZSG noted that the latest Chinese trade data suggest that net imports of zinc concentrates and net exports of metal will rise sharply in 2007. More concentrates will be imported next year but exports should hold this year’s levels as domestic demand soaks up more metal, according to ILZSG.
and a more insight........
METALS INSIDER
Z I N C & L E A D
MI WEEK IN REVIEW: Zinc holds on…for now
Metals Insider - 2007-10-29
MI WEEK IN REVIEW: The bear grip on LME zinc remains firmly in place but 3-month metal is still holding in there…just. It was helped last week by a general indecisiveness across the entire industrial metals complex. London locals were taking their cue from global stock markets, which were initially in thrall to the potential for an anniversary repeat of the 1987 “Black Monday” meltdown and then, when it didn’t happen, to the growing number of big financial houses taking Q3 write-downs against the sub-prime debacle in the US.
Risk aversion has once again become the watch-word, while the metals market can’t make up its collective mind how to balance out a slowing US economy and a still-exuberant Chinese economy. The fact that the LME’s bellwether copper contract closed the week out unchanged pretty much said it all.
LME zinc didn’t fare quite as well, closing the week out at $2,900/tonne, representing a week-to-week loss of $55. However, it managed to defy the many technical traders looking for a break of the $2,850 level to trigger a collapse back to the September lows at $2,700. Twice it lurched through $2,850””once on Wednesday and again on Thursday””but without giving the many bear chart-followers the satisfaction of an ensuing meltdown.
It’s possible that the general round of risk aversion may have played a part since speculative players have been overwhelmingly playing zinc from the short side. That said, however, our fund-watching friends have noted no significant reduction in the collective short position held by the CTA systematic fund community””it remains around 70% of potential capacity.
Technical players have it in for this market and a lot of fundamental-oriented analysts are minded the same way.
The market collectively groaned when Apex Silver Mines announced early in the week the first shipments of zinc concentrate from the giant San Cristobal mine in Bolivia.
San Cristobal has come to symbolise the wave of new and restarted mine capacity that is shifting the zinc concentrates market to surplus in double-quick time. That’s because with anticipated production of 182,500tpy it is by far the biggest single addition to mine supply.
But it is far from being the only one. Australia’s Perilya is one of the many small to mid-sized players ramping up zinc production. It reported Q3 07 production of 35,700t, up from 25,600t in the previous quarter with the increase reflecting the new Beltana mine. More is to come with the company’s Potosi mine producing its first development-stage ore in the period.
The International Lead and Zinc Study Group (ILZSG) calculates that mined production rose by a fast 8.0% year-on-year in the first eight months of 2008 with refined metal production up by 7.7%. Global usage, by contrast, is estimated to have grown by a far more modest 3.5% in the same period.
The Group still assesses the global refined zinc market as being in overall deficit in the Jan-Aug period, albeit to the tune of a modest 28,000t. However, what made us and other analysts sit up was its calculation that August itself represented a 6,600t surplus.
These underlying trends all seem to be pointing in the same direction and day-to-day sentiment in the market has not been helped by the stabilisation in LME zinc stocks after their long downtrend””up a net 1,625t last week following on from the previous week’s 1,775t rise.
The nearby market structure is starting to reflect this tentative turnaround in visible stocks movement, the contango on the benchmark cash-to-3-months period widening to $12.00 at Friday’s valuations from $2.00 the previous week.
It’s worth stressing, however, that this is still a tentative process. The impact of new mine supply is still being partly offset by production problems elsewhere. Both Kazakhmys and Grupo Mexico reported lower Q3 mined production with the former also reporting sharply lower refined metal production due to ambient heat problems with its smelter.
There is also the thorny issue of China. The country is currently hoovering up concentrates at an accelerating pace. Imports of 294,000t in September were a record all-time high…for the second consecutive month.
So far, however, what is going in as raw material is not coming out as refined metal. The country swung back to being a net importer of zinc metal in September, albeit by a highly marginal 704t.
With its concentration of excess smelter capacity, China will play the key role in determining when, and the consensus is still that this is a question of “when” not “if”, concentrates surplus translates into refined metal surplus.
This being China, there is a whole gamut of views as to how the country’s domestic market dynamics will play out. However, analysts at the state research house Antaike, have been quoted as saying they are looking for Chinese exports of zinc to increase from around 50,000t this year to 150,000t next year. They also suggested that the country will see a major (200,000t) inventory increase in the coming period. Were this to find its way onto the international market, the negative impact would be clearly much stronger.
As we’ve said before in this column, we’re not yet in a period of palpable large surplus and although everything seems to be suggesting we’re heading that way in 2008, there remains the possibility for zinc to defy the doomsayers in the short term, even if the spark will probably come either from the likes of copper or from the macro environment, for example in terms of further dollar weakness.
There was no such spark last week. As such the massed technical bears are still sitting pretty, convinced in their own minds that time has run out for this market.
Cheers
Muzza