Australian (ASX) Stock Market Forum

Zinc the metal for 2006

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Thanks fellas,
I find short-term analysis of the LME stocks difficult because Cancellations occur fairly sporadically (as opposed to "Ins" which seem more frequent- though far smaller in terms of tonnage). Possibly this is caused by the high spot prices. Zinc consumers wait till the last minute to place orders (in the hope that there will be a fall in the meantime?)

Disclaimer: my viewpoints/opinions expressed on the LME/commodities are worth only about 30% of Rederobs and 50% of YT's (though maybe the same as MS... ;) )
 
Sorry guys had this in CBH thread but prob is much more relevant here



China's Zinc Demand to Increase 56% by 2010, Antaike Forecasts

By Chia-Peck Wong

Aug. 24 (Bloomberg) -- The demand for zinc in China, the world's biggest consumer of the metal, may rise 56 percent by 2010, Beijing Antaike Information Development Co. has forecast.

The country may need 4.8 million metric tons of zinc by the end of the decade, from 3.08 million tons in 2005, as it requires more of the metal to coat steel to prevent corrosion, Feng Juncong, a senior analyst at Antaike, a research agency that advises the government, said yesterday at a conference.

``As China's construction and transportation sectors grow, consumption has entered its peak growth rate,'' she said in a presentation in Inner Mongolia, a region in western China.

Zinc prices in London have surged 75 percent this year and reached a record $4,000 a ton in May on expectations China's expanding economy will require more metals, while smelter output in China has been stymied by a lack of mined material.

``China will definitely need to rely on imports to fulfill its annual needs'' in the next few years, said Feng, who has been tracking the industry for 12 years and correctly forecast China would become a net importer of refined zinc in 2004.

The domestic supply of mined zinc is likely to lag behind demand by more than 10 percent this year, pushing up concentrate prices, she said. She didn't provide an estimate of China's zinc production in 2010, saying that the country is likely to remain a net importer till then.

This year, China's net imports of zinc products, including mined output, or so-called concentrates, are likely to be stable at 860,000 tons, little changed from last year, as higher internationally-traded prices led Chinese smelters to export more, she said.

Record Forecast

Zinc prices in London, which have fallen about 16 percent from their record, are likely post a new peak in the fourth quarter as stockpiles continue to dwindle, Feng said.

``The fundamental demand and supply factors are still good,'' she said, without forecasting how high prices may rise.

Zinc stockpiles at warehouses monitored by the London Metal Exchange have plunged 55 percent this year to 179,175 tons as of yesterday, the lowest since early 1992.

China's lead consumption may surge 43 percent to 2.3 million tons in 2010 as demand from lead-acid battery makers soars 65 percent to 1.79 million tons, Feng said.

The forecast is ``definitely conservative as over the past 10 years, apparent consumption in China has grown 20 percent every year,'' she said.

Industry consultants including Michael Komesaroff said that developing Inner Mongolia's lead and zinc resources may help China reduce its dependence on imports.

`Own Resources'

``China will prefer to develop its own resources rather than buying from overseas,'' Komesaroff, managing director of Urandaline Investments Pty., said by phone from the northeastern Australian state of Queensland on Aug. 21.

Inner Mongolia is ``highly prospective'' in terms of lead and zinc, he said.

Of the 1.82 million tons of zinc concentrate produced in China last year, 15 percent came from the autonomous region of Inner Mongolia, making it China's third-biggest producer after Yunnan and Gansu, Feng said.

The region ranked as China's top producer of mined lead last year, accounting for 15 percent of total output of 630,000 tons, she said.

There are other advantages exploring for lead and zinc in Inner Mongolia, which possesses China's second-biggest resources of both metals, as many deposits also contain other metals such as silver, she said.

Inner Mongolia's government plans to spend 2 billion yuan ($251 million) in the next five years to explore for mines, Zheng Fanshen, vice director and general engineer of the region's prospecting and exploitation bureau, told reporters at the conference yesterday. Coal was the first priority, and base metals such as copper, lead and zinc the second, Zheng said.

To contact the reporter for this story: Chia-Peck Wong in Inner Mongolia at cpwong@bloomberg.net

Last Updated: August 23, 2006 21:35 EDT
 
Thanks for the article Cath (ers)

There's no doubt China is a hungry dragon. Still, the US link to it's short term prosperity is important and any consumption out past 2010 is going to rely on the US not imploading. Let's hope.

Let's also hope China don't find too many resources in the own back yard and keep buying from Australia....
 
cathers_420 said:
Sorry guys had this in CBH thread but prob is much more relevant here

China's Zinc Demand to Increase 56% by 2010, Antaike Forecasts

By Chia-Peck Wong

Aug. 24 (Bloomberg) -- The demand for zinc in China, the world's biggest consumer of the metal, may rise 56 percent by 2010, Beijing Antaike Information Development Co. has forecast.

To contact the reporter for this story: Chia-Peck Wong in Inner Mongolia at cpwong@bloomberg.net

Last Updated: August 23, 2006 21:35 EDT
Click to expand...

Thx, but thing is Demand is only one side of the equation

Eg. what do u think will happen to the Zinc Price if:

"China's Zinc Demand to Increase 56% by 2010, Antaike Forecasts, but World Supply likely increase 60% by 2010"

thx

MS
 
LME Warehouse Stocks 24 Aug 2006
Close In Out +/- On Warrant Cancelled
Copper 124325 1775 100 +1675 113625 10700
Zinc 178450 0 725 -725 137550 40900


Getting close to coppers levels :D
 
YOUNG_TRADER said:
LME Warehouse Stocks 24 Aug 2006
Close In Out +/- On Warrant Cancelled
Copper 124325 1775 100 +1675 113625 10700
Zinc 178450 0 725 -725 137550 40900


Getting close to coppers levels :D
Click to expand...

wow a ****load of zinc got cancelled! nice ;)

thx

MS
 
michael_selway said:
Alot of Zinc was Sold overnight ie On Warrant decreased by about 8000 tonnes

thx

MS
Click to expand...
MS
You are a worry!
The zinc was sold a long time ago.
What has happened is that warrants have been exercised - ie cancelled - and buyers have chosen to take delivery of the metal.
Accordingly, that metal will be moved out of the various warehouses in days/weeks to come, and land in the laps of typical consumers.
I am still waiting for MS to respond to his "fake buying" claim, made a few days ago: Willbe interested to understand where/how this happens.
 
rederob said:
MS
You are a worry!
The zinc was sold a long time ago.
What has happened is that warrants have been exercised - ie cancelled - and buyers have chosen to take delivery of the metal.
Accordingly, that metal will be moved out of the various warehouses in days/weeks to come, and land in the laps of typical consumers.
I am still waiting for MS to respond to his "fake buying" claim, made a few days ago: Willbe interested to understand where/how this happens.
Click to expand...

Hi Red

Basically Nickel "ins" are frequent as you can see, unlike zinc

lmebd7.jpg


Put simply, if there are frequent "ins" why is there still alot of "cancellatons"?

Wouldnt it be wise to buy it from the "ins" before they enter LME as "ins", than by jacking up the price by buying the "Open", ie already at LME?

In other words, someone is trying to jacking up the price, but the outside underlying demand/supply is actually in surplus, since theres frequent "ins' atm

thx

MS
 
michael_selway said:
Hi Red

Basically Nickel "ins" are frequent as you can see, unlike zinc

Put simply, if there are frequent "ins" why is there still alot of "cancellatons"?

Wouldnt it be wise to buy it from the "ins" before they enter LME as "ins", than by jacking up the price by buying the "Open", ie already at LME?

In other words, someone is trying to jacking up the price, but the outside underlying demand/supply is actually in surplus, since theres frequent "ins' atm

thx

MS
Click to expand...
MS
You must get a grip on how the market works.
In a balanced market the LME plays little more than a "price setting" role for the global base metals community.
That's because the LME will soak up excess metal supply and store it until demand perks up.
Most metal (even today) continues to avoid the LME because it is shipped, typically, from producer to consumer on long term supply contracts.
By following the inventory totals of respective base metals on LME one can determine when supply or demand are waxing or waning. These fundamentals determine whether or not a metal's price will strengthen (via greater metal demand) or weaken (via excess metal supply).
Base metals have been experiencing strong demand in recent years, and their prices have risen markedly.
Respective markets determine a "balancing point", whereby inventory level changes turn into price pivot points via the difference between 3 month future and spot metal prices.
Let's look at copper as a recent example: Prior to its May selldown its backwardation stretched to well over $200/tonne (presently around $20), and its relative strength spun out to an incredible 88 points. Backwardation was doing its job in getting more metal onto inventory, to the point that supply side issues were being addressed and the market determined that copper prices had peaked for the time being. Copper continues to be in backwardation and apart from deliveries into Asian warehouses, there is very little available "free" metal elsewhere in the world.
Copper has had lots of "ins" since May, and only slightly less "cancellations" because the supply/demand equation is fractionally favouring "supply".
Nickel has been different in that the equation has favoured "demand".
Zinc is in a separate league, in that flows in to LME warehouses are infrequent, but usually huge (by comparison with other metal percentage movements). "Outside" activity has been robust throughout this year, and for this reason I believe we are soon to see a huge upside movement in zinc's price: Markets will realise that there is no meaningful supply-side response and backwardations will become the metal's norm in order to rebalance the ledger.

MS, your point about buying nickel from the "ins" before they enter LME as "ins", is valid, but ignores the profit motive available via the market mechanism of backwardation. (It's valid as Oxiana is selling some of its copper cathode direct to nearby Asian markets at premium well above LME spot - but examples like this are not common.)
It is a very simple process for a seller to deliver to LME at spot: The location is known, delivery arrangements are straightforward, and the commerce is reliable.
Whereas for a consumer to pre-empt demand, and then find a producer willing to ship to them in the desired quantity, and at a premium acceptable to the seller, is relatively complex.
In times of tight demand LME warehouses provide a rational, reliable, well regulated basis for purchasing metals.
 
Rederob,

Thanks for your reply

It shows your knowledge on these matters and u are truly an asset to this forum

All the best
 
If you want to invest in zinc look no further than AIM resources this baby is set to soar, 26 percent increase yesterday, with volume skyorcketing to over 20 million today. This stock is way undervalued look out for it , it's a strong buy!
 
recon it will fall on monday...they usualy do....26% is too much for one day...wait then hit hit it again. IDNH.....I do not hold.
 
Fab said:
:mad: It won't be a good day for zinc today on the asx . Drop 5% overnight
Click to expand...

lmesm7.jpg


Metal temporarily "vanishes" in LME warehouse merger
By Nick Trevethan
396 words
23 September 2006
02:33
Reuters News
English
(c) 2006 Reuters Limited
LONDON, Sept 22 (Reuters) - London Metal Exchange (LME) aluminium and zinc stocks dipped on Friday as thousands of tonnes of metal appear to have been removed from warehouses in northeast England, according to data supplied by the LME.

But the falls -- 4,500 tonnes of zinc and 4,225 of aluminium, held in warehouses in Newcastle and Sunderland, were just part of the exchange's attempts to merge the two reporting locations into one.

"This isn't correct. It doesn't reflect the real world and potentially causes a disorderly market," a trader said.

In July, the exchange said it would start to treat warehouses in Newcastle and Sunderland as the same location within SWORD -- the system that manages warrants for LME metal.

The warehouses themselves did not change and the move was purely administrative.

"This was an exceptional situation and we have informed members of what would happen," an LME spokesman said.

"There were notes on the stocks pages today and there will more on Monday explaining the transfer of these warrants from Newcastle and Sunderland to Tyne and Wear."

Warrant holders were asked to cancel and invalidate warrants for metals in Newcastle and Sunderland before close of business on 21 September.

"(This is) in order to allow...good time to recreate the warrants under the location of Tyne & Wear before...stock reporting on the 22 September thus ensuring the stock reports will accurately reflect stock holdings in Tyne & Wear.

But that meant LME stocks of zinc appeared to fall by four percent to 144,075 tonnes, while aluminium inventories seem to 693,050 tonnes.

"This is ridiculous. It creates the impression that there is less metal in the system than there actually is. The metal is still there, it has just been re-classified. I am sure this could have been done with a lot more finesse," another dealer said.

A third dealer said: "We have heard of brokers who have had complaints after trying to sell Sunderland material to their clients that doesn't exist according to the exchange data. It creates a very poor impression."

Dealers expect stocks in the new location, Tyne and Wear, to rise on Monday by about the same amount that they fell on Friday.
Click to expand...

http://www.thehindubusinessline.com/2006/09/23/stories/2006092305381400.htm

thx

MS
 
want-cash said:
If you want to invest in zinc look no further than AIM resources this baby is set to soar, 26 percent increase yesterday, with volume skyorcketing to over 20 million today. This stock is way undervalued look out for it , it's a strong buy!
Click to expand...

CBH new website have good regualr reports which not only talk about themselves, but others also!

http://cms.cbhresources.com.au/shops/cbhresources/catalogue/c8
http://cms.cbhresources.com.au//information/pdf/261006a.pdf

cbhlc6.jpg


cbh3bo7.jpg


Time Source Headline
9/20/2006 4:56:51 AM Dow Jones INTERVIEW: Australia's CBH Pre-commits To Zinc Project


By James Attwood
Of DOW JONES NEWSWIRES

SYDNEY (Dow Jones)--Confident zinc's four-year bull has much further to run, Australia's CBH Resources Ltd. (CBH.AU) is ordering long-lead items for an estimated US$100 million project ahead of a formal go-ahead decision.

A feasibility study into the Sulphur Springs project won't be ready until month-end but CBH has decided to proceed with the purchase of A$9 million in equipment, said Chairman James Wall.

"We're in the process of making a pre-commitment for ordering the sag and ball mills - they're long-lead items and in this environment you've got to get yourself in the queue," Wall told Dow Jones in an interview Tuesday.

Sulphur Springs is in Western Australia's Pilbara region, where giant iron ore expansion projects run by BHP Billiton (BHP) and Rio Tinto (RTP) are adding to the intense global competition for mining materials and labor.

After a capital investment "in the order" of US$100 million, the mine will process at least 1.25 metric tons of ore a year from 2008, churning out 75,000 tons of zinc concentrate and 65,000 tons of copper concentrate, Wall said.

But the company is also looking at a model based on 1.5 million tons throughput, thereby exceeding output at the company's only current operating asset, the Endeavour zinc and lead mine in central New South Wales state.

Sulphur Springs' logical offtaker, at least for the project's zinc concentrates, is CBH's 24.8% shareholder, Toho Zinc Co. (5707.TO) of Japan.

The commitment to order long-lead items allows the project to progress while CBH puts together a financing package over the next four to five months, Wall said.

While funds could come from an equity raising or arrangements with offtakers, debt raising is expected to play a large part.

"All those doors are open, but CBH only has A$6-7 million debt, so there's potential to do quite a lot more without affecting the gearing ratio."

But Wall said debt financing is unlikely to entail hedging.

"I'm not against buying puts at the right time in the market but I'm against selling forward the metal, which has the effect of locking you into particular prices, whereas puts are more like an insurance policy."

Zinc, used to galvanize steel, surged to an all-time high US$4,000 a ton in May before falling back into a volatile, range-bound trading pattern in recent months, prompting some to call the end of a nearly four-year uptrend.

But Wall said now is "definitely not the right time" to be buying puts, describing current base metal price weakness as "a nice little correction."

"It's early days - we're not anywhere near the top of the market in my view."

His confidence is driven by critically low, and still shrinking, global zinc stocks as years of exploration under-investment and structural expansion barriers constrain the supply side's ability to react to China-led global demand.

The bullish market view gives CBH the confidence to grow on several fronts, he said, pointing to the company's ongoing takeover of Triako Resources Ltd. (TKR.AU), whose Mineral Hill project is expected to add around 30,000 tons to Endeavour's output within 18 months.

Wall said Endeavour's throughput rate has all but recovered from a "self mining" incident last year: "In the last quarter I would anticipate we'll be back at 1.2 million tons a year."

At the same time, CBH is waiting for the New South Wales state government's nod to begin an exploration decline at its Broken Hill brownfield project. A formal decision on whether to go ahead with a new underground mine at Broken Hill is expected next year.

In total, the company is looking to reach around 300,000 tons annual production in the coming years to become Australia's third-largest zinc miner, after Zinifex Ltd. (ZFX.AU) and Xstrata PLC (XTA.LN).


-By James Attwood, Dow Jones Newswires; 612-8235-2957; james.attwood@dowjones.com
-Edited by Paul Godby


(END) Dow Jones Newswires

September 19, 2006 23:56 ET (03:56 GMT)
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