Zinc supply seen rising 11% as new mines start output

Print this page Posted on : 12-04-2007 by recycleinme.com

Supply of zinc, the worst performer on the London Metal Exchange this year, may gain 11 per cent next year as new projects boost output, outpacing strong demand for the metal used to galvanize steel, UBS AG said.

CHINA TAX

Production from the projects, including the $800 million San Cristobal mine in Bolivia, will help create a surplus of 600,000 tonnes next year, UBS analysts led by Mr. Glyn Lawcock said in a report dated November 30. A possible new tax on zinc exports in China may also boost supply as producers seek to ship more of the metal before it’s introduced, UBS said.

The price of zinc has dropped 39 per cent this year as stockpiles of the metal gained. Zinc, copper and aluminium have all declined in trading on the LME this half on concern US economic growth will slow, crimping demand for metals.

“Concerns about increasing zinc supply have dragged the metal down, making it the weakest performer of the base metals in 2007,” UBS said. “The concerns have been exacerbated by credit crunch and a slowing US economy, which have pulled the whole base metals complex down”.

RECORD HIGH

Zinc for three month delivery in London rose $85, or 3.3 per cent, to close at $2,595 a tonne on November 30. The metal has dropped by almost half from the all-time closing high of $4,515 a tonne on November 9,2006.

The price will average $3,300 a tonne in 2008 according to UBS. The compares with the $2,931 mean forecast of 11 analysts compiled by Bloomberg. Citigroup Inc last month cut its 2008 forecast for the metal by 28 per cent.

Demand will rise 4.2 per cent to 12.3 million tonnes next year and gain a further 4.5 per cent in 2009, UBS said. The 15 new projects scheduled to start this year will boost supply 11 per cent to 12.9 million tonnes, it said. Production will rise 3.6 per cent in 2009, the report said.

Dow Jones reports:

Like elsewhere in the mining industry, some of the new projects will experience delays but will add about 1.2 million tonnes, or more than 10 per cent of supply, in a global market of just over 12 million tonnes.

Other projects include Zincox Resources Plc’s Shairmerden mine in Kazakhstan and the restarted Lennard Shelf mine in Australia owned by Xstrata Plc and Teck Cominco Ltd.

Source : Business Line