Zinc - The Metal for 2007

[toothfairy]

Dont tell me you are still bearish on zinc

Hard for me not to be bearish about Zn.
Charts look bad (I can't read them, but they seem bad), stockpile increased. Anything else good? Looks like it's NOT the metal for 2007 afterall.

 

[toothfairy]

Is anyone still interested in Zn? Does anyone still talk about Zn warehouse stockpile etc? Up 4100 tons today. Still looks good?

 

[Col Lector]

China's strong demand to support future zinc prices - industry insiders
By Ida Chen

Shanghai. September 10. INTERFAX-CHINA - Zinc prices will remain stable in the remaining months of this year on the back of strong demand from China, industry insiders told Interfax at the 2007 Lead & Zinc Summit - Prices, Futures, Market & Development, held in Shanghai over the weekend.

"China will remain the largest zinc consumer in the world, and the country's strong demand for zinc will continue to support zinc prices for the remaining months of this year," Wu Xijun, a senior official with Shenzhen-listed Zhongjin Lingnan Co. Ltd., a leading zinc smelter located in Guangdong Province's city of Shaoguan, said.

"Although there is currently a slight oversupply of zinc [in global and Chinese markets], China's steel industry has recently entered the September peak consumption season, and we therefore expect zinc prices to remain stable in the coming months, with the current price of RMB 25,000 ($3,324.47) per ton acting as a support point. However, we expect to see substantial global oversupply in 2009," Wu said.

Zhao Cuiqing, deputy director of the China Nonferrous Metals Industry Association's (CNMIA) zinc and lead department commented that the global zinc market is currently driven by increased demand, rather than a raw material shortage, and China's rapid industrialization is will firmly support the demand for zinc in the future.

"In addition to consumption from the downstream steel industry, zinc is also widely used in China's hardware manufacturing sector, which consumes between 1 million and 1.2 million tons of zinc per year. For example, China's water tap manufacturing sector consumed 240,000 tons of zinc last year alone," Zhao explained.

Moreover, Zhao predicts that China's zinc production capacity will increase by as much as 500,000 tons this year and by 680,000 tons next year. There is currently 1.25 million tons of zinc smelting capacity under construction in China, with 620,000 tons in the Inner Mongolia Autonomous Region, where various projects are under construction near mines, according to her.

However, Heng Kun, an analyst from Beijing-based Anxin Securities, held a more bullish view of China's zinc consumption for this year and the next due to China's fast growing economy and low stockpile levels, and commented that China's increased investment in the transportation industry is a major factor contributing to the growth in zinc consumption this year.

Heng further commented that there was no significant zinc oversupply in the Chinese domestic market this year, and predicted that zinc prices on both the Shanghai Futures Exchange (SHFE) and the London Metal Exchange (LME) would reach highs of RMB 30,000 ($3,989.36) per ton and $3,500 per ton respectively in the remaining months of this year.

Recently, capacity growth from global zinc mines has outpaced the growth in zinc smelting capacity. This has led to imported zinc concentrate treatment charges (TCs) reaching record highs of between $370 and $380 per ton.

Since then, zinc concentrate TCs in the domestic market have increased to current levels of between RMB 8,000 ($1,063.83) per ton and RMB 9,000 ($1,196.81) per ton, due to increased domestic concentrate production. According to the CNMIA, China's fixed assets investment in the lead and zinc mining sector amounted to RMB 26.72 billion ($3.55 billion) in the first six months, up 75.6 percent from the same period last year, significantly above 57.8 percent growth in the smelting sector.

However, despite high-level TCs encouraging domestic zinc smelters to expand capacity and increase earnings, stricter government policies on pollution control and facility upgrades have limited capacity expansion plans, Zhongjin Lingnan's Wu commented.

The Chinese government policy to control growth in the zinc and lead industry, released in March this year, has so far led to the elimination of between 300,000 and 400,000 tons of zinc capacity, according to an estimate by Xu Jiancheng, president of Guizhou Xianjin Zinc Co. Ltd., a private zinc smelter located in Guizhou Province's city of Liupanshui, a major zinc producing region in China.

"More than 20 small-scale zinc plants have been shut down in my city alone this year. Moreover, the reduction in zinc capacity, caused by the shutdown of so many small smelters, has tightened supply in the domestic spot market in a way that was not previously anticipated by market players," Xu said.

The spot price of 0# zinc ingot lay between RMB 27,800 ($3,696.81) per ton and RMB 27,900 ($3,710.11) per ton in the Yangtze River Nonferrous Metals Market last Friday, noticeably higher than futures market prices.

The most active November contract closed at RMB 26,405 ($3,511.3) per ton last Friday on the SHFE, while the three-month zinc price on the LME fell to a new low for this year to $2,775 per ton last Friday, down 32.81 percent from the beginning of the year.

According to various traders at the 2007 Zinc & Lead Summit, both domestic smelters and traders have amassed substantial zinc stockpiles, which they are reluctant to sell in the market.

"At present, we're looking at tight supply in the domestic Chinese spot market. We are therefore confident of downstream consumption in the future, and contracts offered by our clients have increased recently," a Tianjin-based trader, who asked to remain anonymous, told Interfax at the summit.

Li Junchao, an analyst from Shanghai-based Xinguolian Futures Brokerage commented that domestic smelters and traders could face losses if they sell refined zinc at current market prices, as the market prices has dropped from when many of them imported zinc concentrate or purchased refined zinc from the market.

"Many smelters and traders are stockpiling zinc and hedging their bets against a fall in prices in the futures market, rather than selling refined zinc in the spot market," he added.

Li predicted that despite the downturn in LME prices exerting pressure on strong domestic zinc spot prices, zinc prices will remain at current levels until the first quarter of next year, as the lion's share of new zinc smelting capacity is not due to start full-scale production until the first quarter. However, when full-scale production does commence, domestic prices will fall dramatically.

According to the China Commodities Weekly published by Macquarie Research last week, an estimated 70,000 tons of zinc has been stockpiled in the domestic market over the past few months, including approximately 40,000 tons in bonded warehouses.

China produced 276,300 tons of refined zinc in July, and a total of 2,082,800 tons in the first seven months of this year, up 20.9 percent from the same period last year.

The nation exported 24,198 tons of refined zinc in July, up 83.69 percent from June, and 213,889 tons in the first seven months, lifting 76.4 percent year-on-year. Imports of refined zinc amounted to 16,493 in July, and 85,802 tons in the first seven months, down 55.7 percent from the same period last year.

 

[rederob]

LME zinc inventories have hit a new cycle low.
Not only that, cancelled warrants are healthy and drawdows are regular.
Zinc prices however have not recognised this point.
That's being blamed on Chinese off-warrant stock apparently being plentiful.
Maybe, but SHFE exchange inventories have also declined each week in the past month.
Does this mean the off-warrant holders are trying to prop up prices by artificially keeping inventories low?
My view is that would not be the case as, unlike copper or nickel, a tonne of zinc is not worth a great deal, and the marginal increases in price would not generate a meaningful profit.
Apparently a lot of new zinc is coming on stream, and the reports suggest this will significantly oversupply the market. Again, that may be the case, but so far it's not showing up in the numbers.
Zinc is very much a case of "watch this space".
Little wonder Zinifex and a few other producers are meandering in a price range, with no breakout foreseeable just yet.

 

[GREENS]

LME zinc inventories have hit a new cycle low.
Not only that, cancelled warrants are healthy and drawdows are regular.
Zinc prices however have not recognised this point.
That's being blamed on Chinese off-warrant stock apparently being plentiful.
Maybe, but SHFE exchange inventories have also declined each week in the past month.
Does this mean the off-warrant holders are trying to prop up prices by artificially keeping inventories low?
My view is that would not be the case as, unlike copper or nickel, a tonne of zinc is not worth a great deal, and the marginal increases in price would not generate a meaningful profit.
Apparently a lot of new zinc is coming on stream, and the reports suggest this will significantly oversupply the market. Again, that may be the case, but so far it's not showing up in the numbers.
Zinc is very much a case of "watch this space".
Little wonder Zinifex and a few other producers are meandering in a price range, with no breakout foreseeable just yet.

It’s funny Red, when ever we start talking about zinc looking strong fundamentally and thinking it’s just about to push on and get some momentum going, it quite quickly takes a sharp turn to the south. And vice versa, when we start thinking things are turning for the worst (i.e. large inflow of metal and low cancelled warrants) which occurred just a few weeks, things all of a sudden turn around over night and look positive again, with as you said metal inventories hitting a new low. I’ve got an idea maybe we should just down ramp zinc’s prospects, because whenever someone on this thread does, the outlook seems to turn positive. lol. My conclusion is to just keep quite on the metal and let inventories slowly work there way lower.

I think the main reason for pushing inventories lower at the moment is the fact that there was a fire at one of Xstrata’s zinc-lead mines, causing major disruptions to production. Here we go a quote: “Ongoing supply tightness is affecting the lead market and Swiss-based miner Xstrata said a fire at its Mount Isa zinc-lead concentrator in Australia will impact about 15,000 to 20,000 tones of lead” (Reuters). Does not mention disruption to Zn but surely if it is affecting lead production, you would assume it would also be effecting Zn production also.

In regards to significant production coming online over the coming years, what about the major zinc and lead mines that will also cease production, such as Zinifex’s Century mine. Also Red, I’m sure you know, but just in case, Kagara was stating that their Admiral Bay project looks like it will easily exceed 75Mt, with annual production of 5mt of ore p.a once developed (containing approx 5% Zn). Mine development however is estimated to cost the company between $1-1.5b.

 

[Enoch]

Has anybody looked at the charts for Zinc on Kitko.

The charts look incredibly bullish.

http://www.kitcometals.com/charts/zinc_historical.html

 

[dubiousinfo]

The folowing is an extract from yesterday's Australian

The writing is also on the wall regarding zinc.

Expect a surplus in that metal of about 250,000 tonnes next year, according to the International Zinc & Lead Study Group.

Global refined zinc production is expected to grow by 5.9 per cent to 11.32 million tonnes for 2007 and then go up another 7.8 per cent to 12.2 million tonnes in 2008.

The metal would, however, remain in deficit over the next few months, and a decline on Friday in inventories at the London Metal Exchange sent zinc up 1.8 per cent to $US3125 a tonne.

and this from The Australian today

UBS analysts said the Nyrstar IPO could "crystallise" value for Zinifex in the near term as zinc prices decreased.

"While the outlook for zinc has likely diminished due to the introduction of new supply, we think the Nyrstar IPO could crystallise value for Zinifex in the near term and represents a key catalyst for the stock," UBS said in a September 26 client note.

more from the International Lead and Zinc Study Group

Global demand for refined zinc metal will likely rise by 3% this year to 11.38 million metric tons and climb by 5.1% to 11.96 million next year, according to press release from the International Lead and Zinc Study Group released in early October.

The group said the demand growth will be "due principally to expected further robust growth" in China of 8.8% in 2007 and 12.1% in 2008.

Meanwhile, the ILZSG expects global zinc mine production to grow by 7.4% to 11.18 million metric tons in 2007 and by 9.5% in 2008.

It also said that forecasts supplied by the group's member suggest that there will be a deficit of 47,000 metric tons in the world market for refined zinc this year, but a surplus of just under a quarter of a million metric tons for 2008.

There seems to be a rising concensus that zinc will be in surplus next year.

 

[BREND]

The folowing is an extract from yesterday's Australian



and this from The Australian today



more from the International Lead and Zinc Study Group





There seems to be a rising concensus that zinc will be in surplus next year.

Surplus market does not mean that zinc price will not rise.
I'm still recommending my customers to buy zinc at $3000 - $3050 level. It has 9% of cancelled warrants in its inventory.

 

[Enoch]

You could well be right that Zinc inventories will rise next year.

Long term though the future of Zinc looks bullish.

I just read an article in Mineweb dated the 26th Sept 2007 where it was mentioned that the market should be in deficit from about 2010 to 2020 with a very big shortfall in supply developing.

No less than 13 major mines are due to close in the next decade. The new mines being developed will not make up the shortfall.

http://www.mineweb.net/mineweb/view/mineweb/en/page36?oid=37500&sn=Detail

 

[BREND]

You could well be right that Zinc inventories will rise next year.

Long term though the future of Zinc looks bullish.

I just read an article in Mineweb dated the 26th Sept 2007 where it was mentioned that the market should be in deficit from about 2010 to 2020 with a very big shortfall in supply developing.

No less than 13 major mines are due to close in the next decade. The new mines being developed will not make up the shortfall.

http://www.mineweb.net/mineweb/view/mineweb/en/page36?oid=37500&sn=Detail

But I do not think that zinc will have a lot of upside in the medium term. Once price rises to $3400 level, Chinese merchants will start to deliver their zinc inventory into LME warehouses.