LONDON, May 14 - Supply problems in top producer China will help underpin global zinc prices for now, but the production lost will not be significant, analysts say.
News of supply disruptions trickled out of China's Sichuan province, rocked by an earthquake on Monday, though as yet details of the impact on metal output are not known.
"We think about 300,000-500,000 tonnes a year of capacity will be off stream for a couple of weeks, but after that it will all be back to normal," said Graham Deller of industry consultants CRU Group.
Independent consultant Angus MacMillan reiterated this view.
"The impact on metal production will be localised and short term," he said.
The London Metal Exchange (LME) three-months zinc price was last indicated at $2,280/90, down from an earlier $2,360.
CRU's Deller said zinc prices would start to collapse from June. He saw the market in a surplus of 700,000 tonnes of metal this year.
"The medium term outlook still looks fairly grim and inventories should steadily move higher through this year pushing prices down further," Standard Chartered said in its latest report.
Below are detailed some of the more significant recent developments in production, stocks and prices that may influence the direction of the market in 2008.
PRODUCTION:
April 30 - India's Hindustan Zinc Ltd said it completed its 88,000 tonnes per year (tpy) debottlenecking project at the Chanderiya and Debari smelters two months ahead of schedule.
April 24 - Hindustan Zinc Ltd said it would invest 36 billion rupees ($896 million) to boost its capacity by 60 percent and build a 160-megawatt power plant. The company, a unit of UK-based Vedanta Plc , said it will raise its zinc output by 298,000 tonnes to 883,000 tonnes by 2010.
April 24 - An Australia law firm said it had begun legal proceedings against Xstrata Plc over a six-year-old girl who had suffered injuries to her brain and nervous system, which the law firm said was linked to lead exposure from the company's Mount Isa mining complex.
April 24 - The global zinc market will record a 215,000-tonne supply surplus in 2008, the International Lead and Zinc Study Group (ILZSG) said. The group expected world refined zinc output to rise by 6.4 percent this year to 12.06 million tonnes and demand to increase by 5.2 percent to 11.85 million.
April 23 - Chihong Zinc expected its production to be hurt in the second quarter but would not cut output this year, company officials said as it repairs facilities amid tight hydro electricity supplies. The company said power supplies to its lead and zinc smelters had returned to nearly normal after snowstorms damaged power networks in Qujing in February, and forced smelters to shut down for 12 days. Chihong expects to produce 100,000 tonnes of refined lead this year. The firm said repair work was expected to reduce refined zinc output by 6,200 tonnes between mid-April and May 28.
April 22 - Canada's Teck Cominco said it may close the Lennard Shelf lead-zinc mine in Australia in the fourth quarter of 2009 if metal prices do not improve. The mine, restarted about a year ago after spending more than three years in care and maintenance, was scheduled to stay open until 2011.
April 18 - Japan's top zinc smelters plan to produce 295,972 tonnes of refined metal in the six months to end-September, compared with 273,916 tonnes a year earlier and 310,610 tonnes in the preceding six month period.
April 17 - Workers at Doe Run's La Oroya lead-zinc-copper-gold-silver operation in Peru were set to return to work after a 12-day strike as the government declared the walkout illegal. Doe Run Peru had said the strike cut output by 25 percent.
April 17 - China produced 881,900 tonnes of refined zinc in the first three months of 2008, up 3.7 percent from a year earlier. Output of mined lead rose by 21.7 percent over the same period to 563,900 tonnes.
April 14 - The global zinc market was in surplus by 7,900 tonnes in February, the International Lead and Zinc Study Group (ILZSG) said. Global refined zinc use was 917,100 tonnes in February, while output was 925,000 tonnes.
April 8 - China may boost its zinc smelting capacity by about 500,000 tonnes in the second half of this year, industry officials said. They predicted Chinese zinc production may rise by about 300,000 tonnes this year.
April 3 - China's Dong Ling Group will start production at an 80,000 tpy zinc facility in July-August, which will boost capacity to about 250,000 tpy, a company official said. Yuguang Gold and Lead will also begin production at a new 100,000 tpy zinc facility in August-September, a company official said. Dong Ling also wanted to build two more 100,000 tpy zinc plants in Shaanxi province as part of a plan to boost zinc capacity to 500,000 tpy in 2012. The company is expanding its investment in lead and zinc mining in Xinjiang and Tibet and hopes to produce 300,000 tonnes of lead and zinc in ore in 2012.
PRICES
Zinc prices ended April at $2,235 a tonne, down from $2,318 a month earlier as the prospect of rising supply and lacklustre demand weighed on sentiment.
The downwards bias continued into early May, with three-months metal falling to $2,135 on May 9.
But prices bounced mid-month, boosted by supply worries.
China's worst earthquake in decades has forced some zinc smelters in China's Sichuan province to halt production. This came on top of a strike at a zinc operation in Namibia and the threat of strike action in Peru.
In January, the twice-yearly Reuters base metals price poll of 43 analysts put the median average for the LME cash zinc price at $2,510 a tonne in 2008 and $2,204 in 2009. In 2007, the price averaged over $3,250.
STOCKS
LME zinc stocks rose slightly in April to end the month at 126,775 tonnes compared with 123,975 tonnes at the end of March. They equated to just under four days of demand.
Inventories in Shanghai warehouses were 70,314 tonnes, down slightly from 72,521 tonnes a month earlier.
Western world commercial stocks totalled 592,500 tonnes at the end of February, equating to 4.1 weeks of demand. The previous month inventories stood at 582,100 tonnes and 4.1 weeks of consumption.
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