Zinc Prices to Rise Slightly
The average world zinc price for the rest of 2009 will remain just slightly above the current year-to-date average of 58¢/lb (compared with 85¢ in 2008), suggests analyst Adam Rowley of Macquarie Bank.
Speaking to the media on the sidelines at the recent at Metal Bulletin seminar on zinc in Düsseldorf, London-based Rowley says there has been “an absolute collapse in zinc demand this year.” And, although producers have reacted to limit the amount of new metal entering the market, London Metals Exchange (LME) inventories of zinc have increased 27% from the start of the year to 320,675 metric tons this week.
In his latest report to clients, Rowley says it now appears that the pickup in zinc prices this year from 50¢ in January to May’s month-to-date 68¢ has been due to investment purchasing of futures, what he terms “the building of long positions” that could boost the full-year price as high as 65¢. The price inflation certainly isn’t due to purchasing by steel mills for the galvanizing material since International Lead Zinc Study Group data shows annualized use falling at least 7%.
World construction indicators outside China are down year-on-year by about 25%, he says, noting that even China is showing only a 4% annual average growth in purchasing. He says China’s so-called massive purchase of zinc by the country’s Strategic Reserve Bureau only has amounted to 159,000 metric tons so far this year, which actually has helped put a floor under zinc prices.
However, Rowley worries about continued erratic LME pricing ahead. He says that any mid-summer investor-driven rise in the LME zinc price “raises the potential that a few producers who idled mine supply and smelter capacity earlier could come back into the market”--which, of course, would drive prices back down.
Speaking to the media on the sidelines at the recent at Metal Bulletin seminar on zinc in Düsseldorf, London-based Rowley says there has been “an absolute collapse in zinc demand this year.” And, although producers have reacted to limit the amount of new metal entering the market, London Metals Exchange (LME) inventories of zinc have increased 27% from the start of the year to 320,675 metric tons this week.
In his latest report to clients, Rowley says it now appears that the pickup in zinc prices this year from 50¢ in January to May’s month-to-date 68¢ has been due to investment purchasing of futures, what he terms “the building of long positions” that could boost the full-year price as high as 65¢. The price inflation certainly isn’t due to purchasing by steel mills for the galvanizing material since International Lead Zinc Study Group data shows annualized use falling at least 7%.
World construction indicators outside China are down year-on-year by about 25%, he says, noting that even China is showing only a 4% annual average growth in purchasing. He says China’s so-called massive purchase of zinc by the country’s Strategic Reserve Bureau only has amounted to 159,000 metric tons so far this year, which actually has helped put a floor under zinc prices.
However, Rowley worries about continued erratic LME pricing ahead. He says that any mid-summer investor-driven rise in the LME zinc price “raises the potential that a few producers who idled mine supply and smelter capacity earlier could come back into the market”--which, of course, would drive prices back down.
quoted from: Purchasing.com
