china is zincs key to price strength

A snipet from basemetals:

China is zinc's key to price strength
By Myra P. Saefong, MarketWatch
Last Update: 10:50 AM ET Oct 15, 2007
HONG KONG (MarketWatch) -- Zinc prices have been on a tear in the past few years and growth in China has and will continue to be the key to the metal's strength.
Spot prices for high-grade zinc were trading at around $1,500 per metric ton two years ago on the London Metal Exchange. It's since more than doubled to more than $3,000, according to data from BaseMetals.com.
Though it's down from its all-time high of $4,580 in November 2006, some analysts believe the metal is in for more gains in the longer term, and China's consumption will be a crucial.
"The really big issue in all metals is China," said Lawrence Roulston, editor of Resource Opportunities. "China is the largest consumer of metals."
Global demand for zinc has been growing at an average of around 5% for the past several years, or about 550,000 tons of new metal annually, according to Dr. Harlan Meade, president and chief executive officer of both Selwyn Resources Ltd and Yukon Zinc Corp. And China leads the pack for zinc demand growth with an annual climb of around 9%, he said. China "has become a significant raw materials importer," said Michel Widmer, an analyst at Calyon. For metals like zinc, "China has most of the spare smelting capacity," and the world needs the refined zinc output.
Balancing game
Zinc demand out of Asia should more than "balance off" slowing demand in North America, which accounts for "only" 12% of world zinc consumption, said Meade.
And demand is steady and "reasonably resistant to substitution because zinc is "used almost entirely for industrial purposes, the building of infrastructure in Asia and the resulting usage of galvanized steel, brass and alloys," he said in a September presentation at the Global Capital Conference in London.
Eric Coffin, co-editor of HardRockAnalyst.com, pointed out that a recent forecast calls for a small supply deficit in 2007 for zinc, followed by a 250,000 metric ton surplus in 2008.
But he didn't show much confidence in the figures. The estimate "is based on some guesses about forward growth and assumptions about mine start ups," he said, so he's not sure how it'll all pan out.
Global demand for refined zinc metal will likely rise by 3% this year to 11.38 million metric tons and climb by 5.1% to 11.96 million next year, according to press release from the International Lead and Zinc Study Group released in early October.
The group said the demand growth will be "due principally to expected further robust growth" in China of 8.8% in 2007 and 12.1% in 2008.
Meanwhile, the ILZSG expects global zinc mine production to grow by 7.4% to 11.18 million metric tons in 2007 and by 9.5% in 2008.
It also said that forecasts supplied by the group's member suggest that there will be a deficit of 47,000 metric tons in the world market for refined zinc this year, but a surplus of just under a quarter of a million metric tons for 2008.
"The market is heading out of shortfall into oversupply," said Martin Hayes, an analyst at BaseMetals.com.
Zinc prices climbed as high as $4,150 in early May on the London Metal Exchange, but for most of this year, the metal has "shown no sign of regaining all-time highs" it reached in November of 2006, he said.
High price response
So far, the initial mine supply response to high zinc prices have been relatively quick, according to Meade.
There's been recent new production largely from one large new mine: San Cristobal in Bolivia, as well as "numerous restarts of former high cost operations and a myriad of very small mines in China," he said.
Coffin said that an expansion project by Hindustan Zinc will account for the bulk of the anticipated supply increase in the next 18 months.
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As I have maintained this one is definately for the L/T holders...

Cheers,
Snap