Market and product
Major zinc market developments in June
Independent consultant Mr Angus MacMillan said that the fundamentals are awful and as we move through the summer I see more downside potential for prices. He expected prices to fall to USD 1,600 per tonne and possibly further to USD 1,500, where he anticipated good support.
Mr Giles Lloyd of industry consultants CRU Group said that he expected USD 1,500 to act as a floor to prices with declines to that level prompting sizeable production cuts, particularly at high cost mines in China. Previously, CRU had thought prices could fall as far as USD 1,100 before that would happen.
But Mr Neil Buxton MD of GFMS Consulting was less certain that prices would fall further. Nevertheless he still expected inventories to accumulate further on rising production and uninspiring demand.
Below are some of the more significant recent developments in production and prices that may continue to influence the direction of the market in 2010.
Production
1. June 16 - The Lisbon based International Lead and Zinc Study Group's latest monthly bulletin showed that the global zinc market was in surplus by 180,000 tonnes in the first 4 months of the year. Global refined zinc use was 3.941 million tonnes compared with 3.197 million in January to April 2009. World refined zinc output rose to 4.121 million tonnes from 3.456 million a year earlier.
2. June 14 - Workers at metals producer Doe Run Peru began a protest demanding the company resume production at its La Oroya smelter which has been offline for a year due to financial troubles. The Peruvian government said that Doe Run Peru must restart the plant by July 24 or it will shut down the smelter for good.
3. June 11 - According to the National Bureau of Statistics, China produced 2,056,000 tonnes of refined zinc in the first 5 months of the year up 34.6% from a year earlier. Output of mined zinc rose by 44.1% over the same period to reach 1,376,000 tonnes.
4. June 4 - Nyrstar is confident it will be able to announce another mining acquisition at the end of July. The company's drive to expand into mining has so far resulted in Nyrstar acquiring mines or buying stakes in them in the US, Greenland and Peru. It has also reached an agreement to buy zinc concentrate from Finnish group Talvivaara in a multi year deal.
Prices
Analysts widely believe that zinc has among the worst fundamentals of the metals in the LME complex. Hence it is perhaps no surprise that it has been its worst performer so far this year.
LME 3 month zinc prices on an official kerb close basis fell 24.63% at the end of the Q2 from the Q1. They were down 30.08% from the end of 2009. LME zinc prices ended June at USD 1,792.50 per tonne down from USD 1,936 a month earlier.
As with other industrial metals, sentiment was undermined by worries about euro zone debt contagion and continued robustness of Chinese demand. By June 7, 3 months zinc prices had fallen to USD 1,577 per tonne, their lowest since late August 2009.
(Sourced from Reuters)
