Figures show Chinese demand for metals remains high,
Teck Cominco expected to climb 50%
While figures show that China remains a net exporter of refined zinc, it nonetheless imported 15,941 tonnes of the metal in October – an all-time high. China continues to be a net importer of copper, bringing in 89,038 tonnes last month.
Domestic demand for both metals remains strong in China, while inventories are near historical lows, according to Desjardins Securities’ John Hughes. As a result, the analyst continues to see renewed strength for metal prices in 2008.
He also reiterated his “buy” recommendation and $55 price target on shares of Teck Cominco Ltd. (TCKb/TSX), which represents upside of 50% from its Thursday close of $36.67.
As yet another signal of China’s growing appetite for metals, two of China’s largest metals company just announced plans to spend roughly US$3.7-billion to develop a large copper mine in Afghanistan.
The Anyak copper field is estimated to contain 11 million tons of the metal, while 220,000 tons are expected to be produced there annually. The deposit is near the capital of Kabul and was first discovered in a geological survey by the former Soviet Union in 1978.
Meanwhile, Octagon Capital analyst Hedrik Visagie forecasts copper consumption in China will be 4.7 million tonnes in 2007, zinc at 3.4 million tonnes and lead at 2.45 million tonnes.
“If consumption grows by 12% in 2008, and Chinese mine production remains static to feed domestic growth, China will have to import 564,000 tonnes more copper, 408,000 tonnes more zinc, and 294,000 tonnes more lead,” he said in a note, adding that this is very bullish for the metals.
Mr. Visagie also pointed out that this analysis contrasts with some of the “current conventional wisdom of doom and gloom and oversupply.”
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