Zinc May Rise 15% on China Demand, Goldman Sachs Says (Update1)
Nov. 25 (Bloomberg) -- Zinc prices may rise 15 percent next year as surging demand in the U.S. and China drains global stockpiles, Goldman Sachs JBWere Ltd. said in a report.
Zinc prices are forecast to average 54 cents a pound, or $1,190 a ton, in 2005, from 47 cents, or $1,036, this year, Goldman Sachs analysts Malcolm Southwood and Paul Gray said yesterday. They increased their 2005 price forecast from 51 cents.
Prices of zinc, used to rust-proof steel, rose 25 percent in the past year to $1,159 a ton on the London Metal Exchange, as mills in China, the world's biggest consumer, use more of the metal to make galvanized steel for new buildings and autos. China is expected to use 9 percent more zinc, and the U.S. 3.5 percent more, causing global demand to be 215,000 metric tons more than mine production next year, the analysts said.
``Demand for zinc in the U.S., China and Japan has been stronger that we had expected and we believe the outlook for zinc remains attractive,'' Melbourne-based Southwood and London-based Gray said in the report. There's ``a high intensity of use in China arising from the abundance of infrastructure and construction,'' they said.
Goldman Sachs increased its forecast for average lead prices by 13 percent to 40 cents a pound, or $882 a ton, in 2004 on stronger-than expected demand for the metal in China, the U.S. and Europe. Forecast prices for next year increased 15 percent to 38 cents a pound, or $838 a ton.
Prices of lead, which is mostly used in batteries, have risen 54 percent in the past year, partly as Chinese consumers bought more cars and trucks. Lead for delivery in three months on the LME closed yesterday at $969 a ton.
Global lead demand is forecast to rise 3.1 percent this year to 7.1 million tons, leaving a deficit of 194,000 tons, the analysts said.
``We expect the high lead price to encourage a surge in both primary and secondary lead production in 2005'' with the market remaining in ``modest deficit'', Southwood and Gray said. ``From 2006 to 2008 we envisage the lead market to be closely balanced, but tending to surplus.''
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