zinc deutche banks favourite

Zinc Remains Deutsche Bank’s Favourite
March 06 2006 - Australasian Investment Review – (AIR)

Recent International Lead and Zinc Study Group figures for 2005 showed a continuing fundamental improvement in the zinc market, with Deutsche Bank suggesting this supports its view of zinc as its preferred base metal exposure this year.


The zinc market was in deficit for the second consecutive year last year, the size of the deficit increasing by 45% compared to 2004, and at 432,000 tonnes it was 20% higher than the broker had forecast.

Additionally, the broker notes inventories have fallen globally, with the stock-to-consumption ratio now around 3.9 weeks globally compared to 5 weeks in 2004, while the transparency of the stock position has also improved.

This leads the broker to suggest the zinc price going forward will be more sensitive to reported LME inventory levels.

Production figures showed only a 104,000 tonne increase globally in 2004, which equates to a 1% increase. The broker suggests the small size of the increase was the result of a number of smelter closures and a tight market for zinc concentrate.

As a result the broker suggests further tightening in the market is likely, as on its estimates the refined zinc market will record deficits of 210,000 tonnes this year and 60,000 tonnes in 2007.

At the same time the broker expects consumption growth globally of 4.9% this year and 5.2% in 2007, this increase expected to flow through to lower stockpiles of the metal. The broker expects the global stock-to-consumption ratio to reach 2.4 weeks by the end of next year.

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