re: up or down info for all Here's what Metals Insider had to say on Nov 7th - before prices actually retreated .............
Do your own research and make up your own mind!
Thundering bull herd drives zinc higher
Metals Insider - 07 November 2006
MI WEEK IN REVIEW: Zinc remains the leader of the LME pack with strong short-term
fundamentals still fanning the flames of bull sentiment that are barely smouldering in former pack
leader copper.
The market is behaving in text-book bull-run fashion, three-month metal in London notching up
another $125 week by its Friday close at $4,290. It was the fifth consecutive weekly gain and the
price made new all-time nominal highs at each of last week’s closes with the exception of
Wednesday.
The combination of copper hurtling towards key support at $7,000 and a negative ISM purchasing
managers index in the US showed that zinc is not completely immune from events in the wider
world but the mid-week pull-back was shallow and found plenty of bargain-hunters and catch-up
buyers at the lows.
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Fund-watchers were generally disappointed by the lack of fresh commitments to the LME
complex at the start of November but zinc was the exception to the rule, seeing more than its fair
share of investment buying.
The CTA systematic fund community lifted its long exposure further to around 55% of capacity
from 50% the previous week, according to our sources.
Complementing the rise in 3-month metal is the steady tightening across the market structure.
The benchmark cash-3s period ended last week valued at $54 backwardation, compared with
$20 the previous week, and most commentators are looking for more tightening to come.
That’s a function of the key bull driver right now—the seemingly inexorable decline in LME
warehouse stocks, which fell another 7,600t last week and are now hovering just above the key
100,000t level.
The week brought more warnings that visible tonnage could run out before the supply-side
response kicks in next year. This time it was Mike Agg, Vice President Refining & Metal Sales for
Teck Cominco, who said on a conference call accompanying the Q3 results that stocks could fall
to just 11 days of supply by the end of the year and zinc may need to move to a level of demand
destruction to re-balance itself.
The market is also prey to a growing list of supply-side issues, last week bringing news of a strike
at the Rosh Pinah mine in South Africa, a production forecast downgrade from Inmet Mining
(mine sequencing), low output figures from Kazakmys (hot weather in Q3) and an announced
delay by Aur Resources in getting its new Duck Pond mine up to speed.
However, the most serious supply-side disruption is probably the least publicised. The collapse of
a pit wall at the Angouran mine in Iran a couple of weeks ago got only the briefest of mentions on
the newswires but more details appear to have filtered through to some heavyweight analysts,
who are now suggesting the 110,000tpy producer could be out of action for several it not many
months and are adjusting their supply-demand figures accordingly.
Zinc’s day in the sun may eventually be limited by the amount of new mine production that will
start hitting the market incrementally over 2007 and by what seems the inevitable US-led
slowdown in global economic growth. A few more dissenting voices are making themselves heard
in the market, one warning producers that they may want to consider selling more heavily at
current levels rather than waiting for the last dollar of the bull rally.
But the day of reckoning will be postponed, copper-style, if chunks of production drop out of the
equation such as that at Angouran.
The word on the London “street” is still that this one is going to $5,000 and no-one, it seems, is
yet ready to try anything more than take a bit of profit on the way up. The herd is truly thundering
and when it moves like this, as many copper bears have found to their costs, there is simply no
arguing with it.
So, what do you think?
ZFX
zinifex limited
