Zinc - The Metal for 2007

rwkni1 · 16 March 2007

I'm still a little concerned, inventories up another 1,100 tonnes and up 5.9% for the week. Zinc prices were really just dragged up by copper. Maybe i'm just being paranoid but BREND's comments of 50kt in China waiting to be dumped on LME have shaken my view a little. Interestingly, most of the material appears to be heading into a warehouse in Malaysia, not Singapore.

vishalt · 16 March 2007

rwkni1: it's all bull**** in my opinion, remember a couple of months ago when copper went through the same thing whilst Zinc was shining?

Metals taking turns to have a correction IMO, copper surged from a low of 2.3 to 2.9 in very little time, Zinc is just settling/consolidating before the next upmove imo.

rwkni1 · 16 March 2007

Interesting post from another forum - perhaps an explanation for the rise in inventories in Malaysia:

"In discussion with a few zinc traders about the ins over the last few days, we mostly agree that the explanation is that the net builds of 2050 and 1650 on Tue and Wed, which ended up mostly in Johor, were to satisfy the production targets for Umicore in Malaysia, which is located just near the Port of Johor. The imports also look like they came from India or Korea as opposed to China, as Singapore stocks still fell -950t yesterday. We are of course only speculating without positive confirmation. Nevertheless, we see the build as unique and temporary. To draw your own conclusions perhaps refer to:

http://www.finezincpowders.umicore.com/ProductionUnits/UmicoreMalaysia/

Note the annual production targets are 11,000t. The fine zinc powder that is produced is primarily for anti-corrosion paint markets in Asia and the Middle East.

End note: Refer to Leapfrog's Commodities corner on the website for weekly and monthly zinc updates at:
http://preview5.awardspace.com/leapfrog.co.nr/commoditiescorner.html"

Halba · 16 March 2007

Hullo all

Zinc appears to be in a seasonal slump. Except its seasonal slump is not as bad as coppers- copper stockpiles were jumping 2500-5000t per day from 100kt to 212kt and now back again. Zinc's addtions about 1000 tonnes per day, and usually have some drawdowns in there.

Clearly using copper example we can see same thing will happen to zinc. Copper slump lasted about 6 months. Zinc's slump(now occuring after copper slump) has occured for exactly 3 months

We are in a metal bull people. As evidence look at the performance of all metals in the past few weeks and even Zinc from 100kt to 90kt at one point

Lead is tight, China using heaps

Nickel is tight as hens teeth

cobalt doesn't appear available

Uranium 'yellow metal' now $91/lb

Copper now it is tight - china building olympics, other projects

Zinc - ?? Hang in there.

Aluminium - different market to the other metals, available.

rwkni1 · 16 March 2007

I thoroghly concur that the metal bull market has a way to go, but just a little concerned with zinc production out of china, as it is a bit of a black box. China has traditionally been a swing producer of zinc, and have been able to dampen prices in the past by exporting at will. While its easy to see what projects are coming on line that are being developed by western and exchange listed companies, predicting much of china's zinc production is a bit of a black art. There is the chance that expansions over the past couple of years at operating chinese zinc mines are kicking in. I'm still a bull on zinc and doubt that chinese supply will exceed demand over the next ten months, but comments like those of BREND suggesting there are significant stocks sitting in shanghai and waiting to be exported do make me a little nervous, because chinese supply is the only thing that i could forsee bringing an end to the zinc bull market.

Halba · 16 March 2007

Talking about the end of the zinc bull already?! Demand will last decades. Sure china will have to buy in sometime.

Halba · 16 March 2007

Zinc stockpiles up 6700 tonnes. I have never seen such a big increase in my life. Really testing my patience this zinc market.

I guess brend was right- 50,000 tonnes are being dumped on the LME. Todays increase is the biggest I've seen in years and does not bode well for this market in the next 1-3 months.

eMark · 16 March 2007

Halba said:
Zinc stockpiles up 6700 tonnes. I have never seen such a big increase in my life.

Well that's well & truly taken the wind out my sails. I guess it's bye bye to breaking even with my ZFX buy price for the short term.

London Metal Exchange Warehouse Stocks
( March 16 )
Metal Tonnes in Storage Change from
previous day
Aluminum 797725 -275
Copper 194400 -1725
Nickel 3564 -30
Lead 30950 -125
Zinc 103525 +6725

Halba · 17 March 2007

Don't get worried. Copper did the same thing for a while. ATM, zinc not down much, traders think its similar to the copper phenomena. Copper is now in deficit again.

rederob · 17 March 2007

Halba said:
Zinc stockpiles up 6700 tonnes. I have never seen such a big increase in my life. Really testing my patience this zinc market.

I guess brend was right- 50,000 tonnes are being dumped on the LME. Todays increase is the biggest I've seen in years and does not bode well for this market in the next 1-3 months.

Halba
You either are very young, or have not followed metals for any length of time.
Drag up the 5year zinc chart and you will see a single warranting over ten times greater than yesterday's.
I agree that zinc is not in the diabolicals that saw copper trashed last year, although zinx is also not the "industrial" metal, and is open to greater manipulation as a result.
I suggest investors tread warily for now.

BREND · 17 March 2007

Early in the week, I had recommended clients to sell zinc call options, strike $3000, Apr 07, premium was USD34/ton then. This translates to a monthly yield of 8.9% a month.

In the worst senario, call options get exercise, investor will have a long position at $3000, which is not a bad level to go long on futures.

I guess this is the way to play zinc now.

Halba · 17 March 2007

hi brend

i agree support at $3000 a tonne seems very strong even with stockpile increases. One would thing this is due to maintaining the differential with copper which is strong.

BREND · 21 March 2007

Zn inventory up 5050mt today. I had cut loss on ZFX.

misterS · 21 March 2007

Brend - do you think these increases in LME zinc stock are related to your post earlier in March? -

"There is 50,000mt of zinc parked in Shanghai warehouse. Possibly waiting for LME price to rise, then export to LME."

Is it your sense of where the zinc stock level is heading that saw you out of zfx when the ex-div date 5 April is not far off? Does this mean you anticipate the sp will not be higher on 4 April than today - or is more that you see it as likely to be a marginal sp difference and you see a better opportunity for your money elsewhere than to take the div - (or the immediate pre-div sp) ?
thanks

vishalt · 22 March 2007

yea yikes at the inventory spike there D:

Halba · 22 March 2007

re: BREND Re: ZINC - The Metal for 2007

--------------------------------------------------------------------------------

Zn inventory up 5050mt today. I had cut loss on ZFX.

Hi brend. i also sold some of my ZFX and all of my pem earlier this week. However the DOW is up over 150 points, so i doubt much weakness in the equities like ZFX as its a top 50.

catihouse · 22 March 2007

misterS said:
Brend - do you think these increases in LME zinc stock are related to your post earlier in March? -

"There is 50,000mt of zinc parked in Shanghai warehouse. Possibly waiting for LME price to rise, then export to LME."

Is it your sense of where the zinc stock level is heading that saw you out of zfx when the ex-div date 5 April is not far off? Does this mean you anticipate the sp will not be higher on 4 April than today - or is more that you see it as likely to be a marginal sp difference and you see a better opportunity for your money elsewhere than to take the div - (or the immediate pre-div sp) ?
thanks

MisterS
I'll think you will find that the ZFX ex div date is 30 March, not 5 April.

coyotte · 22 March 2007

If ZFX dos'nt go with the XJO today --- if LONG I'd be asking WHY ?

Nice Head & Shoulders pattern forming in Zn ?

cheers

BREND · 22 March 2007

I had also get out of my nickel play, took some profits on CVRD.
Nickel inventory up 654mt yesterday, rather unusual.

Halba · 22 March 2007

Hi Brend. Below is the article regarding zinc supply increases

LME FOCUS - Zinc price under pressure, as visible inventory builds up

BaseMetals.com

Zinc prices fell to their lowest for just over a month on the LME on Wednesday, due to warehouse inventories rising to their highest since late-October last year, and further stock increases are expected.

Warehouse stocks leapt 5,050 tonnes, or five percent, to 106,800 tonnes, to their highest since October 31 last year. Today's increase reflected an unusual shipment into Dubai, but further stock rises are expected in general, as off-warrant stockpiles are registered.

However, the stock build-up is somewhat illusory, as much of the recently-warranted metal is 'window-dressing' and not easily available.

"It has been put there for show only," an LME floor trader said.

Since the start of this month, LME zinc stocks have risen 13,275 tonnes, or 14.2 percent. A long-running inventory downtrend bottomed out in December 2006, when stocks fell to 84,825 tonnes, the lowest since 1991.

Traders said the warranting over the last week is part of a 15,000 increase. This is metal which has been off-warrant for some time.

"However, it is highly unlikely that this material will show up in the clearing as it almost certainly forms part of a 'term financing swap'," another trader said.

An international merchant is said to be 'parking' metal in some regions which are less easy to remove metal from -- Singapore and Johor, as well as Dubai. This shows up in reported stocks and depresses prices on the LME. Prices fell three percent on Wednesday to $3,120 a tonne, down $100 from Tuesday.

The inventory operation may also be designed to influence ongoing annual TC/RC (treatment charges/refining costs) negotiations between producers and smelters.

No benchmark has been set as yet, but a level of $300 a tonne is being favoured.

Zinc - The Metal for 2007

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