- The International Lead-Zinc Study Group (ILZSG) has released their July 2003 bulletin, reporting provisional data for the first five months of 2003. On a global basis, there was a 75Kt surplus in the zinc market for the period, down from a 124Kt surplus in the same period in 2002. While global zinc consumption rose 2% YoY in the period, the zinc market continues to suffer heavily from the combination of weak WW industrial demand and excess capacity. On the supply side, stubbornly high stock levels and growth in Asian refined production is offsetting the positive impact of reductions in European production. We see no material improvement in zinc prices before 2005, and as such, zinc remains our least preferred base metal exposure.
- Consumption: World refined zinc consumption grew by 76Kt (+2%) to 3.923Mt in the January-May 2003 period compared with the same period in 2002. Demand was strong in Asia up 101Kt (+6%) to 1.756Mt, with China up 7.8% to 742Kt and Taiwan, up 18.9% to 145Kt. We note that consumption in Germany continues to be strong, up 11% YoY to 230Kt. On a WW basis, however, consumption was flat highlighting the importance of regional Asian demand to the zinc market.
- Production: World refined zinc production totaled 3.998Mt in the same period in 2003, up 27Kt (0.7%) YoY. This rise in refined production was attributable to a 75Kt (4.5%) rise in Asian production, which offset a 74Kt fall (-6%) in European production. Chinese production increased by 28Kt or 3.5% while Indian production rose by 26Kt or 26.5%. On a WW basis, refined production actually fell 0.2% to 2.781Mt, highlighting the negative impact of steady growth in Chinese production. World mine production equaled 3.736Mt in the period, up 149Kt or 4.2% from the same period in 2002.
- Inventories: The ILZSG reported that total commercial zinc inventories rose to 1.152Mt at the end of May 2003, up 16Kt from April 2002. While reported producer stocks have fallen by 45Kt YoY, LME warehouse stocks have risen by over 89Kt during that time. Currently zinc on-warrant stocks in LME warehouses now exceed LME copper stocks for the first time since July 1998, highlighting the comparatively weak position of the zinc market at present. |
