increasing zinc deficit

Zinc deficit expected to intensify – Glencore


18TH MARCH 2015 BY: MARTIN CREAMER
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Ivan Glasenberg
INSTAGRAM
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JOHANNESBURG (miningweekly.com) – The zinc market’s 2014 deficit is expected to intensify this year, Glencore says in its latest annual report.
The 200-page document, in which CEO Ivan Glasenberg notes slower than expected post-financial-crisis normalisation, positions the company as one able to react quickly and benefit strongly from a looming tightening of supply in key commodities.
The 181 000-employee London-, Hong Kong- and Johannesburg-listed company – which achieved top-line earnings performance of $12.7-billion last year through producing and marketing 91 commodities from 90 bases in 50-plus countries – makes use of the report to reiterate its determination to add value at each and every stage of the commodity chain, from extraction to delivery, as well as to keep the tightest of grips on its BBB/Baa investment grade rating.
How it is able to benefit from geographic, product and time arbitrage opportunities, which result from pricing differences for the same product in different parts of the world, product blending requirements and the timing of delivery, is spelt out graphically in the annual report, in which new chairpersonTony Howard reports that the board and senior management are firmly committed to establishing a dialogue with all stakeholders, including the company’s nongovernmental-organisation critics.
The annual report’s extensive coverage on metals, minerals and agricultural markets includes outlines of:
• current copper prices trading within the cost curve;
• the loss of a third of London Metal Exchange (LME) zinc inventories;
• the removal of 20% of mined nickel supply by the Indonesian raw ore export ban;
• a premium jump in aluminium; and
• noteworthy crop progress in Brazil and Argentina.
“We expect the pressures that led to the zinc supply deficit to intensify over the coming months,” the annual report states, against the background of insignificant new zinc production sources due to come on line in the immediate future as well as several zinc mine closures.
Glencore’s own-source zinc production of 199 300 t was 8% down on 2013 and the company attributed the 2014 zinc metal market deficit to better demand with continuing inflows into China.
Besides LME zinc inventories falling by 400 000 t, or 33%, the report records a $29/t rise over the 2013 benchmark of the price of zinc concentrates.
South African thermal coal production of 46.1-million tonnes in 2014, the report says, was 6% higher than in 2013, reflecting a full-year inclusion of the Hlagisa opencast mine, the benefits of productivity improvements at the Tweefontein underground operations and the opening of the Wonderfontein opencast mine.
Glencore’s share of oil production is reported as being a 47%-higher 7.4-million barrels on the first full-year of production from Alen, in Equatorial Guinea, and Badila, in Chad, as well as the increased ownership of the Chad assets.
The Mangara field, in Chad, which started production at the end of last year, is expected to ramp up in 2015.
Agricultural products earnings growth is reported as being boosted by strong results from Viterra, including the benefit of large crops in Canada and South Australia, and a full year of post-integration cost synergies, on top of improved results from the company’s traditional marketing business.