LME warehouse stocks at new low of 348,xxx tonnes but price stays low
both LME 3 Month zinc @ $951 tonne and BWR @ 85c.
Update follows from Metal Bulletin Research out of London
Zinc market analysis
October 21 (Metal Bulletin Research) -- In September zinc
suffered further, with the three month quote for zinc falling
beneath $1,000/tonne for the first time since October 1995. On
September 18 the three month quote fell to $994/tonne while the
spot price fell to $971/tonne. New lows were seen in early
October. Stocks during September showed only a slight decline
falling from 366,100 at the beginning of the month to close at
359,200 tonnes. With stocks at these levels and demand fairly
static, there is sufficient room in the market to allow
investment funds to play a dominant role. It is primarily
selling by funds which has pushed the price beneath
$1,000/tonne.
In the US, premiums eased slightly to 5.3c/lb, indicating a
slight decline in demand brought about by the economic
uncertainties. Meanwhile Singapore premiums rose to $7.6/tonne,
a rise on last month but still significantly beneath the year's
start figure of $11/tonne.
Turning to concentrate news, latest ILZSG statistics indicate a
Western World year-on-year increase in concentrate production
3.7% in the January to July period. The most notable increase
came from the US where production increased by 9% in the same
period, primarily due to higher production at Cominco's Red Dog
mine in Alaska. However, the ILZSG data overstates the increase
to European output (+1.9%) as it does not take into account the
problems at Los Frailes. However the situation is likely to
improve in 1999 with Los Frailes due back onstream at the end
of 1998 and the anticipated opening of Lisheen in Ireland, as
well as the expected full operation of the strike-hit Galmoy
operation. Increased concentrate supply is also coming from
China, where the country has turned from being a small net
importer in the first quarter to being a net seller. In the
first eight months of the year China exported (net) 87,700
tonnes of zinc in concentrates.
Latest ILZSG figures shows Western World refined production
increasing 3.7% year-on-year in the January to July period.
However MBR expects a slight downturn in this rate into the
fourth quarter forecasting a year-on-year increase of around
2.0% - 5.65m tonnes for 1998. This reflects the high level of
output in the fourth quarter of last year rather than a
premeditated cut in output. China's Zhuzhou Smelter resumed
production in September after closure in August for
maintenance. The smelter has a rated capacity of 250,000 tpy.
Chinese exports are now increasing once again despite the
decline in prices. Net exports of metal in August were 39,000
tonnes as against a first half average of under 25,000 tpm.
Pasminco is also to resume zinc production at its Port Pirie
smelter in Australia after its closure in early September due
to technical problems. The smelter will initially be reopened
at 85% capacity resulting in a total loss in production of
around 2,000 tonnes of zinc.
With an immediate recovery in demand unlikely in the present
economic climate, and little response by producers MBR is
bearish about zinc's prospect. Prices are likely to remain
under $1,000 tonne for most of the quarter.
Metal Bulletin Research, London. Tel: (44) 171 827 9977 Fax:
(44) 171 928 6539
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