Zinc the metal for 2006

michael_selway said:

hi red what do u think of CBH, are they unhedged also?

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I realise this question wasnt directed at me but ill take a stab.

I reckon CBH has massive potential but poor market sentiment is really hurting it at the moment.

I will buy it when:
*Endeavour 100% production is confirmed
*Sulfur Springs BFS results are released (these should be a beauty)

And the price is above 59c so no more overhead resistance and is into blue skies.

Endeavour's zinc production is 125ktonnes per year. Makes KZL look very ordinary.

Hi Nizar

You say that you won't get back in to CBH until it passes 59c. How far do you think it will run once it passes this resistence?

ned1 said:

Hi Nizar

You say that you won't get back in to CBH until it passes 59c. How far do you think it will run once it passes this resistence?

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After 59s is broken it will be in blueskies and i think it will really go hard. Its hard to quantify exactly a dollar figure.

Well since i am anticipating a massive run in the zinc spot price which will be massive. They are forecast to earn 12cps at current zinc prices. When the market starts looking at their growth profile with sulfur springs and broken hill and zinc spot starts firing, $1-$1.50 is not unreasonable in the next 3-6months in my opinion.

I dont hold this one.

nizar said:

Endeavour's zinc production is 125ktonnes per year. Makes KZL look very ordinary.

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Are you sure?
?
Contained zinc versus zinc concentrate!

Zinc Rises a Fourth Straight Day; Supply Growth May Lag Demand

By Chia-Peck Wong

Oct. 10 (Bloomberg) -- Zinc rose for the fourth straight day in London on forecasts that supply may not grow quickly enough to meet rising demand from steelmakers.

Prices of the metal, used to galvanize steel, have almost doubled this year after inventories fell 66 percent as zinc miners didn't increase production fast enough.

``It's quite possible we will see even higher prices in the short term,'' Stephen Briggs, analyst at Societe Generale, one of 11 companies that trade on the floor of the London Metal Exchange, said in a presentation today.

Zinc for delivery in three months rose $20, or 0.6 percent, to $3,670 a metric ton at 1:22 p.m. in London. Prices have gained 11 percent since Oct. 4.

Stockpiles of the metal fell for the 11th straight day to 133,475 tons, the exchange said today in a daily report. Global supply of refined zinc is likely to lag behind consumption by 420,000 tons this year, Briggs said.

Supply will continue to remain short of demand next year, Merrill Lynch & Co. analyst Francisco Blanch said in a report dated yesterday.

Copper fell $45, or 0.6 percent, to $7,405 a ton on the LME. Stockpiles of copper tracked by the exchange increased 325 tons to 114,025 tons, according to the exchange.

Copper for December delivery fell 4.20 cents, or 1.2 percent, to $3.371 a pound on the Comex division of the New York Mercantile Exchange. A futures contract is an obligation to buy or sell a commodity at a fixed price for a specific delivery date.

rederob said:

Are you sure?
?
Contained zinc versus zinc concentrate!

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Hi Red

Whats thes the difference?

Also ZFX produces 547k tonnes per yr if you see below, but is this contained zinc or zinc concerntrate?



thx

MS

michael_selway said:

Hi Red
Whats thes the difference?
Also ZFX produces 547k tonnes per yr if you see below, but is this contained zinc or zinc concerntrate?
thx
MS

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The difference is significant as the concentrate cannot be 100% zinc: Like drinking scotch and water, or scotch!
The chart above needs to be updated, especially with respect to KZL.
An important aspect the chart misses is "profit margin"; why is CBH not outperforming?

DJ FOCUS:Zinc May Hit Record As Stocks Fall, Specs Stay Put 10/10/2006 06:55PM AEST

By James Attwood
Of DOW JONES NEWSWIRES

SYDNEY (Dow Jones)--The price of zinc may hit new record highs short term as global stocks of the galvanizing metal continue to shrink and investor flows into metal markets prove more resilient than expected, analysts said this week.

Since surging to an all-time high of $4,000 a metric ton in May this year, as speculative activity amplified a tightening fundamental picture, zinc has fallen into a volatile trading pattern in line with other commodities.

But even as some analysts argue the current volatility is a sign the base metals complex has started a cyclical downtrend after years of rising prices, zinc's supply and demand equation continues to improve.

Current levels of London Metal Exchange zinc stocks have plummeted from 393,300 metric tons at the start of 2006 to 15-year lows of around 135,000, representing just a week of global consumption, as producers struggle to catch China-led demand.

Total stocks - including around 250,000 tons of producer stocks and 100,000 tons of consumer stockpiles - amount to 3.1 weeks of consumption, a level that is "sub-critical," according to CRU analyst Graham Deller.

The tight supply situation is yet to reach the critical levels currently being experienced in the nickel market where stocks equal just 1.5 days of consumption and prices of the stainless steel ingredient continue to strike all time high levels.

However, zinc warehouse inventories are shrinking at an average rate of 1,440 tons a day, putting stocks on track to reach 1.5 days of global consumption, or about 45,000 tons, in the middle of January 2007.

"This figure (1.5 days) is approximately the same level at which nickel stocks are currently, and we have seen the effect that this level of tightness has had on prices," said Standard Bank.

Other analysts note that zinc, despite a sharp correction from May's high and ongoing volatility, remains around $3,700/ton, nearly double of where it started the year and within striking distance of the $4,000 record.

"Any supply interruption will put a strain on this market since there is very little stock cover and potential for that activity to be magnified by speculators getting back into the market," said National Australia Bank minerals economist Gerard Burg.

Rising Risk Of Supply Disruptions

The risk of supply disruptions is increased by the fact that producers "are working flat out, making them more susceptible," the chief executive of Australia's Zinifex Ltd. (ZFX.AU), Greig Gailey, told Dow Jones Newswires Monday.

Macquarie Research commodities analysts agree. In a report this week, Macquarie said even a small disruption "could cause zinc to do what copper and nickel have done this year when stocks of those commodities have basically run out."

NAB's Burg expects the zinc market to remain in deficit next year and average around $3,700/ton, bucking the trend of easing tightness and prices in other base metals.

Others expect zinc to move back into balance in 2007 after three consecutive years of deficit. On such a view, Michael Cuoco of Mitsui Bussan Commodities (USA) Inc. told this week's LME Seminar that prices are expected to average $2,800/ton in 2007.

And offsetting supply risks is "the risk demand could weaken more than we have assumed in our base case, particularly with the weakness in the US construction and automotive sectors - key end-uses for galvanized steel," Macquarie Research said.

But even many of those forecasting lower zinc prices next year acknowledge the growing upside price risk created by shrinking global stocks and signs speculative money flows may be less fickle than thought.

Citigroup's current forecast is for zinc to average $2,650/ton next year, around $1,000 below current levels on the premise that investment flows won't be sustained despite positive fundamentals.

But Citigroup's global commodity analyst Alan Heap hinted the forecast may be revised.

"In the last few weeks I've become more convinced that speculative flows may prove to be more sustained than I had previously expected - that's not reflected in our price forecasts," Heap told Dow Jones Newswires.

LME Warehouse Stocks 24 Oct 2006
Close In Out +/- On Warrant Cancelled
Copper 120825 8175 425 +7750 114950 5875

Zinc 117375 0 2525 -2525 86750 30625

YOUNG_TRADER said:

LME Warehouse Stocks 24 Oct 2006
Close In Out +/- On Warrant Cancelled
Copper 120825 8175 425 +7750 114950 5875

Zinc 117375 0 2525 -2525 86750 30625

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thx YT

btw which Zinc stocks do you hold atm (if u dont mind me asking)?

thx

MS

None funnily enough, switched out of JML and CBH (my favourite by far) into Uraniums EVE and MTN

May do some CFD's on PEM though

YOUNG_TRADER said:

None funnily enough, switched out of JML and CBH (my favourite by far) into Uraniums EVE and MTN

May do some CFD's on PEM though

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Oh ok, im still holding ZFX, PEM, CBH, however sold out of KZL too earlly i think

But i still think theres more upside in all these zinc stocks, dont think the super spike for Zinc price has come yet

Nickel has already super spiked imo due to "fake buying" from LME. Also Nickel "on warrant" never went to 0 if i recall correctly. However i think Zinc may.

thx

MS

Oh MS I forgot, I've got a decent holding of BSM will be a zinc dark horse IMO, very very cheap around $15m, see the BSM thread if your interested



Nice article


MI WEEK IN REVIEW: Zinc bulls on the front foot as buy signals accumulate


Metals Insider - 23 October 2006


MI WEEK IN REVIEW: Big sister copper may be struggling to make further upside progress, for now at least, but zinc has finally managed to de-couple itself from the red metal with the many zinc bulls finally enjoying their day in the sun.



The market spent much of last week toying with the $4,000 level but there was plenty of chatter on the London “street” about the next big number at $5,000 such is the strength of bull sentiment washing over this market right now.



Bull Drivers

Zinc is enjoying a confluence of bull signals right now. The key driver is the seemingly relentless decline in exchange inventories with draws coming through daily, zero arrivals since the first day of the current month and plenty of metal sitting in the cancelled tonnage departure lounge.



As exchange stocks dwindle, the nearby market structure is tightening. The cash-3s benchmark period ended last week valued at $35 backwardation, compared with $22.50 back the previous week and with small contango at the start of the month.



A tightening futures market structure is being mirrored in the physical market with premiums rising, particularly in regions such as Europe which are now starting to run low of LME-registered tonnage.



Underlying it all is the refined market production-consumption deficit, which the World Bureau of Metal Statistics estimated at 236,000t in the first eight months of this year.



The unlikely catalyst for last Monday's surge higher across the LME complex was tin””responding to its own supply dynamics in Bolivia and Indonesia””but zinc needs extremely little encouragement these days to rally on its own.



It notched up a massive $170 day-to-day gain on Monday, closing the day valued at $3,960. Tuesday brought the first foray above the $4,000 level””a big technical number in all sorts of ways--and it found a band of trade selling and speculative profit-taking up there.



Tuesday and Wednesday were generally down days across the metals complex, traders fretting anew about poor macro data out of the US , which has come to symbolise the general fear of slowing global economic growth as we exit this year and enter 2007.



But, as they say, you can't keep a good thing down and with everyone and his dog still friendly to this market it shrugged off the sense of disappointment that enveloped copper towards the end of last week and was back testing the sellers at $4,000 and just above on Friday morning. In the end, it couldn't get the foothold there it was looking for but the bulls won't argue with the close at $3,970””a week-to-week gain of $180 and a year-to-date gain of 108%.



There's Still Time

It seems that just about every passing day brings evidence of the pending supply-side response to the current historically high prices. Last week we got an announcement from Australian production Perilya that it is boosting production next year at its Broken Hill operations with development of a third stream of concentrates at the complex.



Another Australian company, AIM Resources, said it has raised the financing for its Perkoa mine in the African country of Burkina Faso and it will fast-track development to advance the original schedule by around a year.



In the interim the latest batch of Chinese production figures showed still-strong refined metal growth in the country.



But the bulls can blissfully ignore the building tidal wave of new concentrates supply on the argument that it is still too far in the future to make much difference today. As long as those LME stocks continue sliding towards critical levels, there is still time for zinc to finally make good on all those months of bull promise.



As one local commented last week: “With new highs being made…it is difficult to see what is going to stop this one for now. “ Indeed!

Zinc up 4% overnight.

Another great day for Zinc holders. More records to tumble I'd say, with profit taking after lunch maybe.

michael_selway said:

Oh ok, im still holding ZFX, PEM, CBH, however sold out of KZL too earlly i think

But i still think theres more upside in all these zinc stocks, dont think the super spike for Zinc price has come yet

Nickel has already super spiked imo due to "fake buying" from LME. Also Nickel "on warrant" never went to 0 if i recall correctly. However i think Zinc may.

thx

MS

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wat r u doing selling KZL?? that stock is a winner... but yeh actually i sold it was well during may it feel like 30% it was a bit 2 much for me.... but bought it again 2 weeks ago at $5.95.. not planning to sell it until double digits

i also got CBH and that rounds out the zincers for me...

nickel never went to zero because the traders/speculators/hedge funds that were accumulating as the supplies drop are more than happy to sell it at these high prices, same thing with zinc, there is someone accumulating at these prices. I mean, if i had about 40million dollars to spare, id pick up 10,000tonnes (obviously not at one go, but maybe 1ktonne a day or a week)and sell it in 6 months, problem is id need someonewhere to store it, anybody got a huge warehouse somewhere?

MS
You insist on "fake buying" nonsense and have never provided a shred of evidence for it.
There is a good reason - it does not happen on the LME, just ask Liu Quibing if you are able to find him: A man who suffered the indignity of bad decisions.
I think it is important that you start to learn something if you are going to continue posting - so do yourself a favour.

While I agree that zinc has a long way to go, I also think that early speculation on nickel's demise is unwise.
Until the commodity can move from its its incredible tighness, the chance of further upside remains, and it could be significant. We just need a big adverse event from a major supplier.
I certainly do not discount nickel hitting $40k in the first quarter of 2007.

rederob said:

MS
You insist on "fake buying" nonsense and have never provided a shred of evidence for it.
There is a good reason - it does not happen on the LME, just ask Liu Quibing if you are able to find him: A man who suffered the indignity of bad decisions.
I think it is important that you start to learn something if you are going to continue posting - so do yourself a favour.

While I agree that zinc has a long way to go, I also think that early speculation on nickel's demise is unwise.
Until the commodity can move from its its incredible tighness, the chance of further upside remains, and it could be significant. We just need a big adverse event from a major supplier.
I certainly do not discount nickel hitting $40k in the first quarter of 2007.

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LOL i dont think Liu Quibing is around anymore.

nizar said:

wat r u doing selling KZL?? that stock is a winner... but yeh actually i sold it was well during may it feel like 30% it was a bit 2 much for me.... but bought it again 2 weeks ago at $5.95.. not planning to sell it until double digits

i also got CBH and that rounds out the zincers for me...

nickel never went to zero because the traders/speculators/hedge funds that were accumulating as the supplies drop are more than happy to sell it at these high prices, same thing with zinc, there is someone accumulating at these prices. I mean, if i had about 40million dollars to spare, id pick up 10,000tonnes (obviously not at one go, but maybe 1ktonne a day or a week)and sell it in 6 months, problem is id need someonewhere to store it, anybody got a huge warehouse somewhere?

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you mean you sold KZL when it was very low?

Yeah its a winner beacuse its got the best mine life out of those zinc stocks, however thus it also has a high PE

However they shoudl all rise as time comes regardless, and imo esp the low PE ones % wise

thx

MS

michael_selway said:

you mean you sold KZL when it was very low?

Yeah its a winner beacuse its got the best mine life out of those zinc stocks, however thus it also has a high PE

However they shoudl all rise as time comes regardless, and imo esp the low PE ones % wise

thx

MS

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What are you holding MS?

kennas said:

What are you holding MS?

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ZFX, PEM, CBH but wish i hadnt sold KZL in hindsight

So tempting to buy more still....

What zinc stocks are u holding Kennas?

thx

MS