(MB) - LME zinc retreats after hitting five-month highs
2002-12-04 17:01 (New York)
December 4 (Metal Bulletin) - Profit taking has seen LME zinc
prices start to fall away after the recent five-month highs of
$826-828 per tonne. Levels stood at $817 midday Tuesday.
A lot of traders bought into the rally and subsequently took
profits, leading to the dip in price. The price has also
followed copper down somewhat.
Some traders suggested that an end-of-year apathy has also
helped dictate the pace of the market.
A lot of business is being done between traders, and not
industry players. "Because of this they are simply selling
amongst each other and not much resistance is being put up," a
trader said.
"Everybody has made all the money they are going to make for
the year and don't really want to take the market on. They only
really want to do business back-to-back," he added.
The highs of the last few days have given zinc a cushion of
stability for the time being and it is hoped by many that it
can hold on to its position above $800 before the year is out.
"A combination of trade selling and lack of fresh buying means
we're going to see it slip to lower levels. Even if it drops
another $10 back towards $800 its still looking in reasonable
shape for the year-end," a second trader said.
An analyst told MB that fund buying is expected to support the
price at $812 levels, leaving the price "holding up, for now".
He anticipated, however, that the weeks ahead may lead to a
volatile market with volumes dropping off, possibly resulting
in a sub-$800 price before the year-end.
There are still no near-term indications in China of a pick-up
in the zinc and lead markets despite production parebacks
tabled this year by leading Chinese smelters.
Speaking at Antaike's annual China Lead and Zinc conference in
Kunming, vp of China Non-ferrous Metals Industry Assn, Wang
Gongmin told delegates that the prevailing weakness in the lead
and zinc markets will stretch into next year.
"After the second quarter, the downward price fall [for lead
and zinc] has slowed down a little, but overall it does not
reflect a marked improvement in the markets," Wang commented.
Conditions in the Chinese lead and zinc markets have also
worsened due to an influx of imports from Kazakhstan, as a
result of the preferential border trade policy which permits
metal from the country to enter China at half of the 17% tariff
imposed for all other imports.
According to Wang, China has seen in the first nine months of
2002 refined lead imports from Kazakhstan rise sharply to 7,170
tonnes from 413 tonnes in the same period of 2001. Refined zinc
imports from Kazakhstan also surged to 16,719 tonnes for
January-September period this year compared to a mere 184
tonnes in 2001.
He noted that there is some optimism of a slight upturn in
2003, helped by a concerted effort by leading Chinese smelters
to reduce production as well as Beijing's continuing policy to
shut small inefficient plants. The cuts have already shown
encouraging results in terms of production, with overall zinc
output in China for the first nine months at 1.48m tonnes, or a
4.74% year-on year decline.
He pointed out that the drop in lead and zinc output was felt
most in Guangxi province - because of a mining clampdown by
authorities after the Nandan antimony mine accident - where
there was a decrease of 23.3% compared to last year.
However, Chinese lead production for the January-September
period saw a year-on year increase of 9.74% to 933,600 tonnes,
though the rate of production increase this year was slower
than in 2001, he said.
Imports of zinc and lead concentrates combined in January-
September was up by 6.82% on the previous year to 803,300
tonnes.
"We will continue to see lower treatment charges next year and
while prices are unlikely to take off as a result of the
cutbacks, the reduction in output will be helpful and act as a
stabilising factor for the market," he said.
Howver, he pointed out the financial impact that lower
treatment charges will have on Chinese smelters. "Conditions in
the market will be undermined by a smaller profit margin
despite all the positive measures undertaken by the producers,"
he said.
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