zinc stinks, i don't think so....

Scotiabank: Watch copper, zinc & coal
By: Dorohy Kosich
Posted: '25-JAN-05 05:00' GMT © Mineweb 1997-2004



VANCOUVER--(Mineweb.com) Scotiabank Group Vice President Patricia Mohr is bullish on copper for the near term, believes coking coal prices will hit a record high in 2008, and advises investors to keep an eye on zinc.

In a presentation to the Mineral Exploration Roundup in Vancouver, B.C. Monday, Mohr, who heads economics, industry and market research for the bank predicted the "U.S. dollar is going to move down again quite substantially." While a bull market currently exists in commodities and the metals and minerals price index is at its highest levels since April 1989, Mohr cautioned, "overall, commodity prices may lose momentum in late 2005."

China's rapid industrialization will be crucial for commodity prices during the first half of this year. Mohr explained that China has emerged as the number one or number two consumer of four key base metals. But, she fears that China's growth will slow later this year.

Mohr declared that "I remain quite bullish on copper in the near term," predicting copper prices will continue to perform very well in the first half of this year. Smelter capacity constraints will keep the prices high, she added, predicting the average LME copper price for 2005 will be US$1.28 per pound while the LME nickel price will average $6/lb.

However, Mohr said that zinc may prove to be the real base metals champion as zinc prices rise over the next two years. LME zinc inventories "have dropped substantially," she said, while the LME zinc price was up to 58-cents per pound Monday.

The expansion of global mine production for zinc will be much slower than from 1993 to 2002 when many new mines started up, Mohr said, while "a great deal of mine depletion" will take place later in this decade. Meanwhile, at least two major Chinese smelters have reduced their zinc output due to electrical power shortages.

"Huge galvanized steel capacity in China will also boost global zinc demand in 2005, even if North American motor vehicle production only edges up by 2% and U.S. housing starts eventually ease," according to Mohr. "Refined zinc premiums are rising."

"LME (zinc) inventories have finally declined below 700,000 tonnes," Mohr said, suggesting that hidden zinc stocks held by trading houses "may have been worked down."

"I am quite positive on zinc," she declared.

Meanwhile, Mohr predicted that coking coal prices will reach a "record high in FY2005," perhaps of $125 per tonne. While major expansions in coking coal production are planned in Australia, Mohr believes Australian shipping port capacity constraints will limit the amount of coking coal, which can be shipped to other nations.