Reuters reported that a surplus in the global zinc market is expected to have a significant impact on western inventory levels soon, putting pressure on prices in the near term.
Analysts said that the excess stocks may be needed after next year when a lack of new mines starts to bite.
Mr Angus MacMillan independent consultant said that the fundamentals are poor, the market's going to record a fairly substantial surplus this year and prices are likely to fall further as a result.
Mr Graham Deller of industry consultants CRU Group said that the surplus in the global zinc market was not reflected in inventories in the second and third quarters of this year because much of the excess supply has been held in stockpiles in China.
Mr Deller said that LME stocks will start moving up steadily and significantly and prices should stay under pressure. Stocks of zinc held in London Metal Exchange warehouses were at 631,425 tonnes on Monday.
Mr Carl Firman analyst of Virtual Metals said that there was not enough new mine production coming through to offset closures of some large operations. This will become increasingly evident in the next year or so. This surplus might just be needed in the next 18 months for the market to keep above water.
Below are some of the more significant recent developments in production and prices that may continue to influence the direction of the market in the remainder of 2010 and into 2011.
Production: October 29 - Xstrata will spend AUD 274 million to boost output at its George Fisher mine in Australia by nearly 30% by 2013. Xstrata said that it had got approval from the state government of Queensland to precede with the expansion at the group's Mt Isa operations. The expansion will increase the annual production rate to 4.5 million tonnes from 3.5 million.
October 26 - The global zinc market was in surplus by 166,000 tonnes in the first 8 months of the year, the Lisbon based International Lead and Zinc Study Group's latest monthly bulletin showed. Global refined zinc use was 8.174 million tonnes compared with 6.940 million in January to August 2009. World refined zinc output rose to 8.340 million tonnes from 7.236 million a year earlier.
October 22 - Shenzhen Zhongjin Lingnan Nonfemet, China's third largest zinc producer had closed its Shaoguan lead and zinc smelter in Guangdong province completely on October 21 to comply with a pollution investigation. In addition, China has clamped down on power intensive smelting in Henan province, one of its major producing regions. According to official data, more than 750,000 tonnes of annual refined lead capacity also was closed in September.
October 21 - China produced 3,829,000 tonnes of refined zinc in the first 9 months of the year up 23.8% from year ago levels. Output of mined zinc rose by 31.9% over the same period to reach 2,773,000 tonnes.
October 18 - Bolivia's government, aiming to boost mining exports set December as the target to award the contract to build two zinc smelters, a project estimated at USD 500 million. Zinc is the country's leading mineral export and the mining minister said the smelters should start operating within three years.
October 11 - Breakwater Resources has settled the strike at its El Toqui mine in Chile. Normal mining and milling activities were to resume within a few days.
October 11 - The Lisbon based International Lead and Zinc Study Group said that the global refined zinc market will be in a surplus of 161,000 tonnes next year on top of a 233,000 tonnes surfeit this year. Global refined zinc output is forecast to rise by 10.9% this year to 12.53 million tonnes and by 5.6% next year to 13.23 million tonnes. World demand is expected to rise by 13.1% this year to 12.3 million tonnes and by a further 6.3% to 13.07 million in 2011.
October 7 - Japan's major zinc smelters plan to produce 302,677 tonnes of refined zinc in the 6 months to March 31st 2011 up from 272,905 tonnes in the preceding 6 months and from 279,257 tonnes a year earlier.
Prices; Zinc prices ended October at USD 2,423 per tonne up from USD 2,195 per month earlier. The market trended generally higher throughout much of the month reaching USD 2,638.75 on October 27 its highest since the start of the year.
The market got a boost earlier from news of a smelter closure in China and from widespread expectations that the US Federal Reserve would announced another round of monetary stimulus after its meeting on November 1 to 2. Prices have pulled back from late October highs, however, as sentiment in most commodities markets has been hurt by a strong US dollar and fears the Fed might be less aggressive than previously thought in efforts to stimulate the economy.
Metals were initially wary about which direction to take after the Fed said that it would buy a further $600 billion of government. Benchmark copper went on to reach a record high on November 11 on strong Chinese economic data. While zinc also picked up, its gains were more muted and it failed to regain the October highs.
Since then prices have been hit by worries that China may hike interest rates and talk that Beijing is looking to curb speculation. In July, the twice yearly Reuters base metals price poll put the median average for the LME cash zinc price at USD 2,050 per tonne down from the January forecast of USD 2,293.
IBG Price at posting:
26.5¢ Sentiment: Buy Disclosure: Held
