Australian (ASX) Stock Market Forum

Zinc the metal for 2006

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rederob:If your ideal pattern of zinc prices turns out, will we see a spike in KZL/ZFX etc within the next 2 weeks or so of quiet zinc price movements?
 
stoxclimber said:
rederob:If your ideal pattern of zinc prices turns out, will we see a spike in KZL/ZFX etc within the next 2 weeks or so of quiet zinc price movements?
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stox
Yes.
But what I want and what the market does are usually two different stories.
There is a time to be bullish, and a time to be watchful.
Right now it's "be watchful".
If you are game, it's also a good time to preempt the rise by getting into the zinc equities, but only with a very tight stop.
As an investor, my personal preference is to wait another week and get a clearer picture of trend.
If you took a look at what happened to OXR, you will realise that if this happens to ZFX and brethren, then another week will not be a worry.
If I were talking to you on the street, I would be more forthright. I would say you mad if you didn't have ZFX already, and you would be equally mad for not adding more today.
My madness is exposed by also having around 20% of my portfolio in 2 zinc equities.
 
rederob said:
stox
Yes.
But what I want and what the market does are usually two different stories.
There is a time to be bullish, and a time to be watchful.
Right now it's "be watchful".
If you are game, it's also a good time to preempt the rise by getting into the zinc equities, but only with a very tight stop.
As an investor, my personal preference is to wait another week and get a clearer picture of trend.
If you took a look at what happened to OXR, you will realise that if this happens to ZFX and brethren, then another week will not be a worry.
If I were talking to you on the street, I would be more forthright. I would say you mad if you didn't have ZFX already, and you would be equally mad for not adding more today.
My madness is exposed by also having around 20% of my portfolio in 2 zinc equities.
Click to expand...

This correction i dont think you need to be watchful imo

you need to keep an eye on "ins' and "on warrant', it hasnt really got worse, its got better imo (for zinc price going up)

http://www.kitcometals.com

thx

MS
 
michael_selway said:
This correction i dont think you need to be watchful imo

you need to keep an eye on "ins' and "on warrant', it hasnt really got worse, its got better imo (for zinc price going up)

http://www.kitcometals.com

thx

MS
Click to expand...
I have said elsewhere that I disagree with that idea.
Without cancellations and drawdowns the "tightness" that pushes prices higher disappears somewhat.
The reality is that if you do not look at the totality of factors, you will be blindsided.
I expect zinc to fall away again today, and will personally see if it represents another opportunity to buy the dips: However, as I would not get back into KZL over $6 I suspect a longer wait is ahead.
 
rederob said:
I have said elsewhere that I disagree with that idea.
Without cancellations and drawdowns the "tightness" that pushes prices higher disappears somewhat.
The reality is that if you do not look at the totality of factors, you will be blindsided.
I expect zinc to fall away again today, and will personally see if it represents another opportunity to buy the dips: However, as I would not get back into KZL over $6 I suspect a longer wait is ahead.
Click to expand...

Red but there has been cancellations as well no "ins"

lmega6.jpg


on warrant is down to 81k atm

thx

MS
 
michael_selway said:
Red but there has been cancellations as well no "ins"

on warrant is down to 81k atm

thx

MS
Click to expand...
Michael
Please realise that if you work "fundamentally" you have to look to as much information as is practical, and useful.
Cancellations determine that there will be drawdown, and without drawdown the fundamentals cannot tighten.
Lack of inflow might just mean that supply is dormant, which is not a problem if there is no drawdown.
This is because exchange warehouses are traditionally a vestige for excess metal, rather than a first port of call for consumers.
The normal state of metals in warehouses is "contango". That is, spot prices are lower than forward prices, and the higher future price accounts for the cost of storage.
When this balance changes we are in a backward state to the norm, and we therefore call this "backwardation".
Zinc is in backwardation, and the rate was spinning out until a week ago.
Backwardation draws metal to spot, as any excess can be sold for more than the cost of holding it on inventory (for a rainy day!).
This is a beautiful mechanism to watch, and if you watch it closely enough, you can read a lot more into the market than just the metal flows per se.
The valid point of your observation about "ins" is that that there are few, and of low volume.
Mind you, recently we have seen cancellation rates fizzle, as the spot price rose and consumers walked away from the market.
My point here is that we need to "watch" carefully for signs that consumers have lost their battle and have no option but to purchase from spot.
This is a key point, and the price will quickly pivot and head sharply higher.
My view is that "the game" will last weeks rather than days, so I have a suspicion we might be able to buy into some good zinc equity dips next week.
 
rederob said:
Michael
Please realise that if you work "fundamentally" you have to look to as much information as is practical, and useful.
Cancellations determine that there will be drawdown, and without drawdown the fundamentals cannot tighten.
Lack of inflow might just mean that supply is dormant, which is not a problem if there is no drawdown.
This is because exchange warehouses are traditionally a vestige for excess metal, rather than a first port of call for consumers.
The normal state of metals in warehouses is "contango". That is, spot prices are lower than forward prices, and the higher future price accounts for the cost of storage.
When this balance changes we are in a backward state to the norm, and we therefore call this "backwardation".
Zinc is in backwardation, and the rate was spinning out until a week ago.
Backwardation draws metal to spot, as any excess can be sold for more than the cost of holding it on inventory (for a rainy day!).
This is a beautiful mechanism to watch, and if you watch it closely enough, you can read a lot more into the market than just the metal flows per se.
The valid point of your observation about "ins" is that that there are few, and of low volume.
Mind you, recently we have seen cancellation rates fizzle, as the spot price rose and consumers walked away from the market.
My point here is that we need to "watch" carefully for signs that consumers have lost their battle and have no option but to purchase from spot.
This is a key point, and the price will quickly pivot and head sharply higher.
My view is that "the game" will last weeks rather than days, so I have a suspicion we might be able to buy into some good zinc equity dips next week.
Click to expand...


Rederob, is it possible that consumers of the metal actually stock up when it suits them, to try and ride out high spot price increase and this causes these drop in prices while the supply looks slim?
 
rederob said:
Michael
Please realise that if you work "fundamentally" you have to look to as much information as is practical, and useful.
Cancellations determine that there will be drawdown, and without drawdown the fundamentals cannot tighten.
Lack of inflow might just mean that supply is dormant, which is not a problem if there is no drawdown.
This is because exchange warehouses are traditionally a vestige for excess metal, rather than a first port of call for consumers.
The normal state of metals in warehouses is "contango". That is, spot prices are lower than forward prices, and the higher future price accounts for the cost of storage.
When this balance changes we are in a backward state to the norm, and we therefore call this "backwardation".
Zinc is in backwardation, and the rate was spinning out until a week ago.
Backwardation draws metal to spot, as any excess can be sold for more than the cost of holding it on inventory (for a rainy day!).
This is a beautiful mechanism to watch, and if you watch it closely enough, you can read a lot more into the market than just the metal flows per se.
The valid point of your observation about "ins" is that that there are few, and of low volume.
Mind you, recently we have seen cancellation rates fizzle, as the spot price rose and consumers walked away from the market.
My point here is that we need to "watch" carefully for signs that consumers have lost their battle and have no option but to purchase from spot.
This is a key point, and the price will quickly pivot and head sharply higher.
My view is that "the game" will last weeks rather than days, so I have a suspicion we might be able to buy into some good zinc equity dips next week.
Click to expand...
Rederob,some good information there,thanks.

I also agree with you that consumers of zinc will lose their battle and will have to purchase from spot.There simply is no substitute for zinc in galvanizing and with no zinc,production stops.Galvanizing accounts for 70% of zinc use.Die casting is another main use for zinc and i'm not sure there is a cheap substitute for that either.

My only worry is the poor state of copper which will probably drag down other base metals should it collapse.I think the only reason it hasn't dropped more is because the funds are a bit wary of shorting base metals as they have been burnt badly recently,underestimating them.What are your thoughts on this?
 
canuck
Yes, it is possible.
That is why I think the battle has some weeks left.
Typically we now have a number of consumers caught out with their forward order books, going to spot to make ends meet.
We will also have many other consumers drawing down their inventory, continuously, in order to try and ride out the high backwardated price of zinc.
What we should soon see is a dip in zinc prices, followed by a heck of a lot of buying - watch out for a refreshingly high rate of cancellations in order to test this.

specman
I agree that copper will bring zinc down again next week.
But I think that once zinc is below 50k tonnes, it will have disconnected from copper and will run its own race.
I have set aside a few dollars for a final tranche of KZL, but will not pay more than $5.60 which clearly is not yet in range - so be it. Corrections and consolidation do not happen overnight, and I have almost 10 years before I am going to be able to enjoy my efforts into retirement.
 
rederob said:
I have set aside a few dollars for a final tranche of KZL, but will not pay more than $5.60 which clearly is not yet in range - so be it. Corrections and consolidation do not happen overnight, and I have almost 10 years before I am going to be able to enjoy my efforts into retirement.
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What a great shame it will be if it drops to $5.70 and then rebounds.
 
So true Nizar, that is the danger if you treat share trading as a science. For me I treat it like an art, not unlike bringing up children. ( i.e. all the rules you set will be broken, at the end of the day some are luckier than the others.)
 
rederob said:
I have set aside a few dollars for a final tranche of KZL, but will not pay more than $5.60 which clearly is not yet in range - so be it. Corrections and consolidation do not happen overnight, and I have almost 10 years before I am going to be able to enjoy my efforts into retirement.
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Any particular reason you favour KZL over the other zinc plays, especially ZFX?
 
It will be interesting to see how the zinc producer react on monday as zinc went down quiet strongly but copper went up and the down went up.
I am expecting ZFX to go down but not sure it will be the big type of drop that we have experienced recently.
 
stoxclimber said:
Any particular reason you favour KZL over the other zinc plays, especially ZFX?
Click to expand...
Strong growth pipeline, already well planned and coming to fruition month by month.
Exceptional prospectivity and aggressive exploration program.
Opportunities through scale to reduce costs and increase profit margins.
Capacity in 2007 to offer dividends through strong excess cash.
Downside - exposure to copper: Upside - generous copper hedging program in 2007 and 2008 guaranteeing excellent returns.
 
rederob said:
Strong growth pipeline, already well planned and coming to fruition month by month.
Exceptional prospectivity and aggressive exploration program.
Opportunities through scale to reduce costs and increase profit margins.
Capacity in 2007 to offer dividends through strong excess cash.
Downside - exposure to copper: Upside - generous copper hedging program in 2007 and 2008 guaranteeing excellent returns.
Click to expand...

also its got a high PE already comparatively you could add

thx

MS
 
What do you think these 2 companies will do on monday ? It is looking pretty grim to me looking at the big drop in commodity price overnight . Vommodities are currrently becoming very volatille
 
michael_selway said:
also its got a high PE already comparatively you could add

thx

MS
Click to expand...
Thanks MS
I like its PE.
(I don't look at published pes for companies like KZL. I forecast it likely earnings based on trend continuity.)
 

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