Zinc market may stabilise on production shutdowns Inventories likely to rise; demand seen improving

Print this page Posted on : 01-28-2009 by recycleinme.com

"Expect stock levels to further increase, followed by a move to balance/deficit from 2011 to 2012."

Dow Jones

London, Jan.27

Zinc inventories will rise further but production shutdowns and improving demand conditions will return the market to at least balance, and perhaps deficit, in 2011 or 2012, the UK-listed miner Anglo American PLC said onTuesday.

'Not excessive'

"Inventories are rising but are not yet at excessive levels," Anglo said in a presentation on its Web site."Expect stock levels to further increase, followed by a move to balance/deficit from 2011 to 2012, with the timing and/or extent (of the move) dependent on the amount of capacity shuttered, plus demand," Anglo added.

The company said current zinc prices are cutting well into the global production cost curve, resulting in mine closures, with this situation exacerbated by tight credit conditions.

Funding woes

Low prices, higher operating and capital expenditures costs, as well as funding difficulties, are causing project deferments. "Historically, smaller operations and projects respond rapidly when prices recover," Anglo added.

Zinc prices peaked in November 2006 at $4,580 a tonne on the London Metal Exchange, and have since fallen some 77 per cent.

Dowa output cut

On the demand side, growth in zinc consumption is expected to remain around 4-5 per cent annually, driven by continuing industrialisation and urbanisation, Anglo said.

But global growth is seen decelerating rapidly in the short-term, the company added.

Bloomberg reports: Dowa Holdings Co, Japans second-largest zinc smelter, may deepen output cuts in the fiscal first half and slash executive pay by as much as 20 percent as global demand weakens.

The company may reduce zinc and copper output by as much as 20 per cent in the fiscal first half to September if demand further deteriorates, its Chief Executive Officer, Mr Hirokazu Yoshikawa, said in an interviewin Tokyo. The company said last week it would cut production by 10 per cent in February and March.

Source : Business Line