‘Zinc may outperform other metals on China demand’

Print this page Posted on : 07-20-2007 by recycleinme.com

Zinc, used to galvanize steel, may perform better than other base metals in the “near” term as falling Chinese exports and rising steel production will boost prices, said Scotia Capital Inc.

NET BUYERS

China became a net buyer of refined zinc in April and May, depleting global inventories. Without Chinese exports, the rest of the world would face a shortage of the metal, analysts Na Liu and Eric Yan said in a weekly note e-mailed to Bloomberg on Tuesday.

China’s demand for zinc, which helped to boost prices more than fourfold in the past five years, is increasing as economic growth averaging 9.5 per cent a year in the past decade has made cars and appliances more affordable. General Motors Corp and its rivals sold 25 per cent more vehicles in China last year.

“In our view, fast-increasing galvanized steel production, the largest zinc consumer, will help domestic zinc prices find a higher floor”, said the analysts with the Toronto-based investment bank. They didn’t provide a price forecast.

CHINA PURCHASE

Baosteel Group Corp, China’s biggest steelmaker, said on June 28 it will double zinc purchases by 2012 as it raises galvanized steel output.

The company will need 1,40,000 tonnes of zinc metals, including refined zinc and alloys, in 2012, up from an estimated 70,000 tonnes this year, Mr. Chen Xiangming, an official in charge of alloy developing and trading, said.

China’s production of galvanized steel more than doubled in May from a year earlier and rose 59 per cent from April to 2.03 million tonnes, Scotia Capital said.

Chinese imports of zinc concentrates, the raw material used to make refined zinc, almost tripled as zinc producers increased production 22 per cent in the first five months.

Chinese smelters are relying on overseas concentrates as domestic mine production only rose 9.7 per cent, said the report.

TC/RC RISE

Still, there are concerns about potential increase of zinc supplies, the bank said.

The spot treatment and refining charge, known as TC/ RC, has risen to $300 a tonnes from a low of $20 a tonnes in the first half of 2006, indicating the global zinc concentrate market has eased.

Zinc futures for delivery in three months on the London Metal Exchange traded at $3,530 a tonne at 1.25 p.m. local time.

Source : Business Line