Zn price up, page-31

Been mulling over this post from ainsleym 20th Nov:

A prolonged reduced IO price will eventually result in increased competiveness of finished steel products in construction versus other materials where substitution is possible (especially brick and concrete structures) and also will make steel bodies for autos more competitive vs aluminium bodies. Zinc demand will follow steel demand.

So BHP and RIO are pumping out iron ore - supply is increasing albeit at lower prices. Traders are discounting all base metals accordingly, zinc to a slightly lesser degree than the others. A few considerations:

1. Ainsleym talks to more steel coming into play, which should translate to more zinc. We know of all the various rail projects and interesting to note that share prices for construction, autos and infrastructure segments on the Hang Seng have been increasing.

2. So, if anything the LME inventories should start to decline faster and we're seeing that happen in the last few days. Be very interesting to see how this trend goes in the next few days/weeks.

3. Ultimately, would seem the zinc spot price is artificially low, given that more iron ore means more zinc used so in an under supply situation, totally different to iron ore, the spot price should be increasing.

If I'm correct in this analysis, am hopeful sometime soon, zinc will surpass $1.10 per pound - as long as I'm not missing anything