Zinc was one of the few industrial metals to end November in the plus column and while the demand outlook is not too bright, the recent supply response suggests the downside for prices is limited.
High cost producers in China in particular have started to feel the pinch.
Barclays Capital metals analyst Gayle Berry said that "We are beginning to see something of a supply response, more in the way of producers holding back from selling concentrates and metal, so the downside does look relatively limited.”
Barclays expected zinc prices to trade in a USD 2,000 to USD 2,500 a tonne range next year.
The London Metal Exchange three months zinc price was last indicated at USD 1,862 a tonne.
Mr Graham Deller of industry consultants CRU Group expected prices to regain the USD 2,000 level in early 2012. While demand had weakened, so too had supply so the net result was that the global market was still looking at a surplus of around 200,000 to 300,000 tonnes, no worse than expectations six months ago.
But Fastmarkets analyst Mr Will Adams still thought prices had further to fall, with USD 1,800 a trigger level for more output cuts, particularly in top producer China.
Below are some of the more significant recent developments in production, stocks and prices that may continue to influence the direction of the market in the remainder of 2011 and into next year.
PRODUCTION
Nov 28
Glencore was in "advanced talks" to take a majority stake in the Rosh Pinah lead-zinc mine in Namibia, a source close to the situation said. The sale to Glencore of the 50.04% stake held by Exxaro Resources and a further 30% held by Namibian empowerment groups was confirmed on December 15. The deal is subject to regulatory approvals from Namibia and South Africa.
Nov 16
The global zinc market was in surplus by 275,000 tonnes in the first nine months of the year, according to the International Lead and Zinc Study Group. The figures showed global refined zinc use was 9.445 million tonnes in January to September, up from 9.332 million in the same period last year. World refined zinc output was 9.720 million tonnes, compared with 9.467 million a year earlier.
Nov 2
Bolivia awarded a Chinese consortium called Henan Yuguang International Economic & Technical Cooperation a contract to build two zinc smelters at a cost of roughly USD 500 million, the Bolivian government said. The state owned Chinese group will provide financing for the project and the smelters are seen coming on line in 2015, according to the head of Bolivian state mining firm Comibol.
PRICES
1. Zinc prices made some headway in November, ending the month at USD 2,071 a tonne, up from USD 2,000 at the end of October.
2. While sentiment for the most part remained gloomy, zinc avoided a re test of the previous month's lows just above USD 1,700.
3. Most of the market's gains, however, were made on the last day of the month following news of a coordinated move by major central banks to provide liquidity to the financial system.
4. But concerns for global economic prospects and a potential negative impact on demand took its toll on prices again in December.
(Sourced from Reuters)
