Reuters reported that the zinc market is heading for another sizeable surplus 2010 as high prices have encouraged producers to restart idled capacity, while demand growth is expected to be sluggish. But others are less bearish on the market's prospects.
Mr Angus MacMillan independent consultant said that the fundamentals are basically poor. It's hard to escape the conclusion that the market is heading for a significant surplus 2010 and beyond. He saw prices falling towards USD 1,800 per tonne in the coming months and lower still into 2010.
At 1602 GMT the London Metal Exchange 3 month’s price was indicated at USD 2,235/45 per tonne. But others said that investors will keep buying, encouraged by economic data, such as car production and construction, which will show strong YoY gains in the H1 of 2010 because things were so bad in the comparable period.
However, Mr Giles Lloyd of industry consultants thought prices would eventually fall to reflect the poor fundamental picture. He said that one big concern is that we're already seeing mine restarts. He added that if prices remain where they are and companies have access to the cash to restart operations more could be encouraged to do so.
Mr Neil Buxton MD of GFMS Consulting was more upbeat on demand and did not anticipate a massive supply surge. He said that "That does not necessarily mean that prices are going to rally significantly." He added that it could instead mean that the market holds on to the bulk of its recent gains.
Below are some of the more significant recent developments in production, stocks and prices that may influence the direction of the market in the rest of 2009 and into 2010.
Production:
October 30 - HudBay Minerals Inc will restart its Chisel North mine and concentrator in Snow Lake, Manitoba effective immediately and expects full production from the operations by the second quarter. The mine and concentrator have been on care and maintenance since the Q1 of 2009, due to depressed zinc prices at the time. The company expects the restart to provide about 30,000 tonnes of zinc concentrate feed to its Manitoba based Flin Flon zinc plant annually.
October 26 - The International Lead and Zinc Study Group said that the global zinc market was in surplus by 327,000 tonnes in the January to September of 2009. Global refined zinc use was 6.912 million tonnes, down from 7.724 million per year earlier. World refined zinc output was 7.239 million tonnes down from 7.780 million in the same period of 2009.
October 26 - The mine's owner Minmetals said that repairs to the Century zinc concentrate pipeline that burst on October 5 will extend into November as it awaits installation of a section of piping. A component needed to bypass the damaged area of the 304 kilometers pipeline will have to be installed over a 1 kilometers distance before operations resume. On October 22nd the company said that inventories of zinc concentrate held by the mine were 30,000 tonnes to 35,000 tonnes half the level of early October.
October 22 - Doe Run Peru operations at its La Oroya smelter, stopped since June because of financial and environmental troubles, might not restart until 2010. The company, a unit of US based Renco Group had said in September that work at its La Oroya smelter would likely resume within a few weeks. Doe Run, which halted work after banks cut its credit, had said that it could regain access to loans and restart production at the world's most diversified smelter if the deadline were extended.
October 22 - Anglo American Plc announced a new restructuring that will shed a quarter of overhead staff and save USD 120 million per year. The company said that it would divest more assets including its zinc operations.
October 22 - China produced 3,108,500 tonnes of refined zinc in the January to September of 2009 up 5.2% from the same period of 2009. Mined zinc output fell by 11.1% over the same period to 2,110,800 tonnes.
October 21 - The national association of mining unions said that Peruvian mine workers returned to work after 48 hour mining strike intended to pressure Congress to pass 2 bills that would improve labor benefits. Miners want the government to lower the age for retirement and lift caps on profit sharing but it is not known when the bills might be put on the agenda for floor votes.
October 16 - Federal and state approval is expected imminently for a major expansion of Teck Resources Limited’s Red Dog lead zinc mine in Alaska. The mine, located on land owned by the region's native Inupiat Eskimo people would be allowed to start processing ore at a new site, Aqqaluk, that would effectively double the 20 year old mine's lifespan, under the pending permits. A mine official said that the expansion was needed to keep Red Dog from shutting in 2011. The mine operators hope to start working on the Aqqaluk deposit in early 2010.
October 13 - Japan's top zinc companies plan to produce 283,822 tonnes of refined zinc in 6 months to end March 2010 up from 246,319 tonnes in the preceding 6 months and 278,212 tonnes in the same period a year earlier.
October 12 - The ILZSG said that the global zinc market will be in a surplus of 227,000 tonnes following a 380,000 tonnes surplus 2009. The ILZSG expects global consumption to rise by 11.9% in 2010 to 12.04 million tonnes and also forecast that world refined zinc output will grow by 10.1% to 12.26 million tonnes 2010 due to increased output at many plants which made cutbacks.
October 8 - Australia's Ironbark Gold Limited said that it may sign supply contracts in Europe to help fund a zinc mine in Greenland, which could yield up to 200,000 tonnes of metal annually starting in 5 years. Zinc miners are stepping up financing efforts to exploit projected supply shortfalls caused by older mines nearing the end of operations. A mixture of debt and equity financing would be used to help meet the estimated USD 400 million cost of developing Ironbark's Citronen mine, supplemented with supply pacts struck.
October 8 - HudBay Minerals said that it would put development of its Lalor gold zinc deposit in Manitoba on a fast track and those exploration successes at the site suggested the beginning of a much bigger find.
October 2 - South African diversified miner Exxaro said that it had restarted production at its Zincor refinery after a blast at the only plant of its kind in the country killed 3 workers and injured 12 others. A company official said that the refinery had been restarted the previous week and was running at 90% of its capacity of 9,000 tonnes per month but would ramp up to full production within 2 weeks.
October 1 - A regional governor's press office said that the new co owners of Chelyabinsk Zinc Plant have pledged to restore output at Russia's top zinc producer to pre crisis levels. The press office of the Chelyabinsk Governor Piotr Sumin quoted Mr Andrey Kozitsyn CEO of Urals Mining and Metals Company as saying that new owners would guarantee stable supply of raw materials to the plant for it to produce some 153,000 tonnes of zinc in 2010.
October 1 - The mine's union leader said that labor talks at Antamina, a major copper zinc pit in Peru are going well and a new contract should be completed this month. The mine and the union are negotiating a new contract to replace a current 3 year agreement that expired July 24th 2009.
