whats the real story with zinc, page-3

Here's my reading,

Supply - there are a number of new mines coming on this year - BUT - in the latter half of this year. Supply/Demand will be in deficit, but a lower deficit compared to last year (~200kT). There is a lot of downside risk for supply, because virtually all mines are running flat chat to take advantage of high prices.. so very little slack available. The big wildcard however are a number of small mines in China that last year contributed 250kT of supply. Most of these mines were shut down by the WTO due to unsafe working conditions, but with record high prices many have opened. Also China has cunningly taxed all exports of zinc, other than LME grade zinc. Plus I believe the report from Antaike was politically motivated in claiming China was in surplus, and somewhat deceptive - they are in a larger deficit if you consider concentrate.

Demand - the main factor here is obviously China, and demand is rising quite rapidly (BHP has some great graphs in their recent half-yearly on how metal consumption increases with income per capital). China still has a long way to go. However, demand in the US/Europe seems to be static..

The third factor is speculation and that is what I think is driving the market right now. Spooked by three things - Copper supply increasing, Red Kite registering losses and China working hard to crash the market, this has driven down the rest of the metals in sympathy. This is somewhat self fulfilling like most market hysteria as the more the price goes down, the more fund redemptions, and the more metal futures are dumped..

My belief is that past Chinese new years until at least the 3Q we will see prices rise slowly and stabilise around $1.50/lb.

I think at that point two things could happen- the first is that drawdown resumes at ~850T/day as before, in which case we will end up with a supply crunch around mid-year like where we are now with nickel. At this rate it only take about 2-3 months of buying and there stock is critical. If this starts to happen, speculators will turn around their position and accelerate this affect by buying up remaining stock as well. This could send the price sky-high to the $3-4 range.

Alternately I believe the price could stay floating in the $1.50 range, when new supply starts coming on board slowly in 3th and 4th Q. I believe under this scenario that zinc price will be searching for a stability point under a situation of very high volatility. There are a massive number of risks on the supply downside.
Given the tight situation, should something happen at a single major mine e.g. Apex in Bolivia, etc. could blow fresh wind into the bull market.

Longer term (2009, 2010..) there is a looming crisis in the industry. Most of the new mines are sub 60kTpa. There are only a few deposits around in the >200kTpa range that haven't been exploited and worldwide demand will continue to rise annually as mines run out.
Some of the mines expected to have run out haven't because prices have been so high that have been able to extend reserves.