Zinc miners trim as demand slumpsPrint Sarah-Jane Tasker |...

Zinc miners trim as demand slumps

Print Sarah-Jane Tasker | January 10, 2009

http://www.theaustralian.news.com.au/business/story/0,28124,24892702-36418,00.html


Article from: The Australian

THE zinc price, along with the price of all base metals linked to the construction industry, continued to hover at low levels in 2008, leading to a list of mine closures in that sector.

Following a flow of announcements towards the end of last year, Teck Cominco, the world's second-largest zinc producer, announced this week it was cutting 13 per cent of its workforce.

Its move was no surprise, as zinc for delivery in three months on the London Metal Exchange fell about 49 per cent last year.

Diversified miner OZ Minerals has been a high-profile victim of falling commodity prices and has shed 135 jobs at its Century zinc mine in Queensland as it battles to keep the company afloat amid debt problems. Xstrata has scaled back zinc and lead output at its Macarthur River Zinc mine in the Northern Territory because of poor demand.

Analysts expect the oversupply in the zinc market evident over 2007-08 to continue this year. Goldman Sachs said it was encouraging that production cuts amounting to almost 500,000 tonnes had already been announced.

Further, with the zinc price having dipped well below the 75th percentile of the industry cost curve during October-November last year, there is now evidence of closures among the smaller Chinese producers.

That also casts doubt on prospects of a recovery in the price this year to the levels of 2006-07.

Commonwealth Bank's commodities team expects the zinc price to hold at a low level in 2009 but tips it could eventually recover modestly from current low levels.

London Metal Exchange zinc dropped yesterday to $US1235 a tonne, from $US1280.

"Slower international economic growth and the difficulties of the motor vehicle industry should limit growth in zinc demand," commodity strategist David Moore said.