Zinc prices likely to drop 39% this year: GFMS 'Supply to exceed demand on global recession'

Print this page Posted on : 03-25-2009 by recycleinme.com

The surplus is forecast to widen to 210,000 tonnes, compared with 198,000 tonnes a year ago, before narrowing to 46,000 tonnes in 2010 and moving to a deficit of 247,000 tonnes in 2011.

Bloomberg

March 24

Zinc average prices may drop 39 per cent this year as a supply decline is outpaced by a drop in consumption amid the global recession, according to GFMS Metals Consulting Ltd.

Expanding surplus

Zinc cash prices are forecast to average $1,150 a tonne compared with $1,870 a tonne last year as a global surplus expands even as producers cut output, London-based GFMS said in a report.

The metal may average $1,550 in 2010 and $2,200 in 2011, it said. Prices have averaged $1,171.88 since January.

Fall in Consumption

Immediate-delivery zinc on the London Metal Exchange dropped 43 per cent in the past year as demand dropped from users including carmakers and steelmakers. Global production exceeded demand last year for the first time since 2003, Xstrata Plc, Europe's largest producer, said in January.

GFMS expects global consumption to fall 1.6 per cent to 11.3 million tonnes (mt) this year, after growing 1.6 per cent last year, and production to decline 1.5 per cent to 11.5 mt, compared with an increase of 2.9 per cent in 2008. The surplus is forecast to widen to 210,000 tonnes, compared with 198,000 tonnes a year ago, before narrowing to 46,000 tonnes in 2010 and moving to a deficit of 247,000 tonnes in 2011.

Limited downside

Although the fundamentals of the zinc market are hardly stellar, the downside for prices looks limited, Mr Neil Buxton, GFMS Managing Director, wrote in a quarterly report. Some production cutbacks are permanent, while other idled projects are unlikely to be reactivated in the short-term, he said. Zinc stockpiles tracked by the LME stood at 345,325 tonnes on Monday, compared with a 16-and-a-half-year low of 58,100 tonnes in October 2007. Stockpiles have grown from the exceptionally low levels of 2006 and 2007, but are not large from a historical perspective, Mr Buxton said.

Source : Business Line