Zinc Declines to 17-Month Low as Stockpiles Increase; Tin Gains
By Chanyaporn Chanjaroen
Sept. 10 (Bloomberg) -- Zinc fell to the lowest in 17 months on the London Metal Exchange as growing stockpiles stoked concern that a glut of the metal will increase. Tin and copper rose.
Oversupply of zinc, which is used to galvanize steel, will reach 50,000 metric tons this year and 300,000 tons in 2008 as mine production grows, according to Societe Generale. Stockpiles of the metal monitored by the LME expanded 4,100 tons, or 5.8 percent, to 74,250 tons, the exchange said today. That's the largest one-day gain since March 16.
``The weakness in prices reflects not just today's stock rise but a trend of stock increases,'' Stephen Briggs, an analyst at Societe Generale in London, said today by phone. Stockpiles have increased 14 percent this month.
Zinc for delivery in three months fell $60, or 2.2 percent, to $2,715 a ton as of 10:36 a.m. in London, the lowest intraday price since April 4, 2006. The contract lost 11 percent last week, the largest decline since the week ended Feb. 2.
The metal has dropped 36 percent this year, the most among the six industrial metals traded on the LME. Lower prices will hurt profit at miners including Apex Silver Mines Ltd., whose $800-million San Cristobal zinc and lead mine in Bolivia started production in August.
Tin prices will be buoyed by a rising shortfall in supply this year, said Standard Bank Group Ltd., Africa's largest lender by assets. The bank raised its forecast for the so-called cash price to an average $14,180 a ton, 2.3 percent higher than an earlier estimate. The average so far this year is $13,764.
Surprise Disruptions
``Some surprise supply disruptions, together with signs of stronger demand, are now creating a case for another rally,'' the bank said in the report. The bank forecast a supply deficit of 18,000 tons, compared with 2,000 tons last year.
The benchmark three-month tin contract gained $300, or 2.1 percent, today to $14,900 a ton.
Southern Copper Corp., the world's fifth-largest producer of the metal, will hold wage talks with workers in Peru today to try to prevent a strike, Arnaldo Oviedo, general secretary of the union representing workers at the company's Ilo smelter said Sept. 8.
Workers at the smelter and Cuajone and Toquepala mines plan to stop work on Sept. 12 after last month rejecting an 11.5 percent annual pay increase. Employees at three of Southern Copper's mines in Mexico have been on strike since July 30.
Contract workers at Chile's Codelco, the world's biggest copper producer, ended a five-week strike on Aug. 1.
Copper rose $35.50, or 0.5 percent, to $7,209 a ton.
Nickel fell $100, or 0.4 percent, to $26,900 and lead was unchanged at $2,875 a ton. Aluminum lost $6 to $2,441.
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CBH Price at posting:
0.0¢ Sentiment: LT Sell Disclosure: Not Held
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