Zinc

[winston]

China Quake May Cause 60,000 Ton Zinc Output Loss
By Li Xiaowei

May 20 (Bloomberg) -- Zinc output in China, the world's largest producer, may drop by 60,000 tons this year because of smelter damage from the May 12 earthquake, Beijing Antaike Information Development Co. said.

Production losses may not be made up later in the year because of the damage at some smelters, Feng Juncong, Antaike's chief zinc analyst, said in a phone interview from Beijing today. The researcher's forecast for Chinese output this year before the quake was 4.06 million tons, up from 3.71 million last year.

Sichuan Hongda Chemical Industry Co. and some other smelters halted production after China's strongest earthquake in more than 58 years killed at least 34,000 people, buried buildings, damaged factories and power infrastructure. Prices of zinc, used to galvanize steel, are up 4.2 percent since May 9, the last trading day before the quake.

``The loss may ease global supply pressure for the metal which is in surplus and curb further declines,'' said Feng.

The metal will have a surplus of 215,000 metric tons this year after global production expanded, the International Lead and Zinc Study Group said April 24.

Feng based her estimate on the assumption that Sichuan Hongda's 100,000-ton capacity would remain closed for at least three months, and the rest of the halted 350,000-ton capacity would stay shut for a month to a month and a half.

Small Loss

Macquarie Group Ltd. estimates that zinc losses from the China quake will be 20,000 tons to 30,000 tons, equal to less than 1 percent of Chinese output as a whole.

``We estimate that around 300,000 tons per annum of zinc smelting capacity has been affected by the crisis, which may force the suspension of operations for 7-15 days or more,'' said the bank in a research note dated May 19.

``This minor cut in supply is unlikely to significantly reduce the surplus that we are forecasting'' for 2008, it said.

Hongda's smelter in Sichuan, the biggest such plant in the province, halted production because of severe damage and disrupted water and power supplies, the company said. Two Chinese zinc smelters with 110,000 tons of capacity in the south of Gansu province will stay shut to the end of May, Liu Long, an official at one of them, Gansu Baohui Zinc Co., said May 16.

Hanzhong Bayi Zinc Industry Co., a 120,000-ton smelter in China's Shaanxi province, is running at 70 to 80 percent of capacity and may take time to resume full output because of transport and power disruptions, the China Securities Journal said. Calls to Bayi were not answered.

Most other affected capacity belongs to small, little known smelters in the region, Feng said.

[winston]

UPDATE 1-Smaller China zinc smelters agree 10 pct output cut
Sat Jul 12, 2008 10:43am EDT
By Alfred Cang

SHANGHAI, July 12 (Reuters) - China's small- and medium-sized zinc smelters, accounting for about 30-40 percent of output in the world's top producer, agreed on Saturday to cut production immediately by 10 percent to lift local prices, two industry sources told Reuters.

The smelters, including Yuguang Gold and Lead (600531.SS: Quote, Profile, Research, Stock Buzz) and Hongda (600331.SS: Quote, Profile, Research, Stock Buzz), also called on the government to establish a strategic reserve of the metal in order to help stabilise prices, as it does for other commodities like copper and wheat.

While the sources cited prices as the main motive for the curbs, the deal comes just two days after China's biggest aluminium smelters agreed to cut output by 5-10 percent to ease escallating electricity shortages that threaten to push the country into its worst summer power crisis since 2004.

"The smelters agreed to...try their best to support domestic prices," said one source with a smelter who attended the Saturday meeting in Shanghai, the third in a series of meetings aimed at reviving prices that have fallen by a third in four months, plunging many smelters into the red.

Speculation of production curbs helped drive Shanghai zinc futures prices up by their daily maximum 4 percent on Friday.

Third-month prices SZNc3 had touched 14,890 yuan a tonne on Wednesday, the lowest since zinc was introduced on the Shanghai Futures Exchange in March 2007 and below the 15,000 to 16,000 yuan that analysts say is smelters' break-even point.

The country's top zinc producers, like Zhouzhou (2626.HK: Quote, Profile, Research, Stock Buzz) and Shoguan, did not take part in the meeting as had been expected, the sources added.

China produces about a third of the world's refined zinc, a metal used mainly to galvanize steel.

Zinc is less energy-intensive to produce and a much smaller industry than aluminium, but faces similar power supply problems as Chinese generators curb electricity production due to soaring prices and low supplies of coal, their primary fuel.

Some smelters in China were already running at as low as 60 percent of capacity due to weak profit margins as prices fell.

The second source conceded that there was no system in place for monitoring compliance with the pact, however, leaving it up to individual smelters to determine how the implement the curbs.

RESERVES MOVE

"The second decision is that the smelters will call on the central government to launch a national policy on zinc reserves," said the source with a smelter.

Beijing runs similar reserves for other commodities and regularly buys and sells supplies in order to prevent prices from rising too high or falling too low.

But the source added: "I do not think the central government will approve the zinc reserves proposal, I think the priority is for the smelters to control their expansion and curb the oversupply in the market."

Shanghai three-month zinc futures have halved in the past 14 months, despite production losses following the massive Sichuan earthquake in May, as Beijing's policy of discouraging exports of the metal has caused a domestic supply glut.

But prices rebounded sharply this week on fears that power shortages will hurt production, with LME zinc MZN3 surging 15 percent since hitting a two-and-a-half year low on Tuesday.

China's refined zinc production rose 4.1 percent to 1.55 million tonnes in the first five months of the year

[winston]

China scraps zinc export rebate, LME prices leap
Thu Jul 31, 2008 7:06am EDT
By Polly Yam

HONG KONG, July 31 (Reuters) - China scrapped a tax rebate on exports of refined zinc and silver on Thursday, sending London zinc prices up more than 5 percent on the prospect of reduced exports from the world's top producer of the metal.

But analysts said the ending of the 5 percent rebate on exports of super-high grade zinc -- the grade most refiners now produce after a similar rebate on low-quality metal was scrapped in 2006 -- may not have an immediate impact given oversupply.

"China's exports of zinc have fallen away massively this year and prices have also fallen so you can argue -- what difference does the cancellation make when the market is swimming in zinc?" Leon Westgate, an analyst at Standard Bank, said.

China's exports of refined zinc, mostly high-grade, fell 78 percent to 40,873 tonnes in the first half of this year, but that has done little to revive London Metal Exchange zinc MZN3 prices, which have halved since a peak in late 2006.

The rebates, which China's State Administration of Taxation said on Thursday would be scrapped from Aug. 1, are for a 13-17 percent value-added tax that China had used to encourage exports.

But Beijing is now trying to keep more energy-hungry metals at home to save resources and feed fast-growing consumption.

"The rebate removal on zinc should not have a big impact as China's exports have fallen," said Wang Jianjun, trading director at Zhuzhou Smelter (600961.SS: Quote, Profile, Research, Stock Buzz), the top zinc producer n China and a subsidiary of Hunan Non-Ferrous Metals (2626.HK: Quote, Profile, Research, Stock Buzz).

But exports may rise anyway in the fourth quarter or next year as production rises.

Zhuzhou is adding 100,000 tonnes of zinc capacity, while Yuguang Gold and Lead (600531.SS: Quote, Profile, Research, Stock Buzz), the country's top lead and silver producer, plans to start production at at a 100,000 tonne-per-year zinc facility on Aug. 8 to double zinc capacity.

"For the longer term, removing rebates is not a bad thing. It may enhance consolidation in the industry," said one trader.

SILVER EXPORT QUOTAS

Chinese exporters have quotas to export a total of 4,800 tonnes of silver this year, but may not use all of these after the rebate removal, Wang at Zhuzhou said.

"The removal will have a bigger impact on silver as most output is made from imported lead ores," Wang said.

Many lead smelters import lead ores by using foreign trade finance under which the smelters are required to export silver as payments, since silver is a by-product of lead smelting.

Smelters prefer to export silver as lead is subject to a 10 percent export tax.

"The removal of the silver rebate would directly affect imports of lead ores. Smelters would try to ask suppliers to reduce charges on silver content," a trader at Yuguang said. "If they failed, they may reduce ore imports and exports of silver."

But China's silver exports should rise again from fourth quarter given China produces more silver than it needs, the trader said.

Yuguang still plans to produce 600 tonnes of silver this year. It exported more than 200 tonnes in the first half.

[winston]

Buoyant zinc masks outlook by Rebekah Curtis

Improving steel consumption will buoy zinc over coming months, but the chances are high for a dip later in 2010 as producers prematurely restart idled capacity.

Investors are starting to see the first signs of life in a steel industry that has languished since 2008 because the world economic downturn devastated the auto and construction sectors.

But a global rise in auto sales is supporting the demand outlook for steel and its galvanizer, zinc. "We're seeing a big pick up in steel production globally which has got to be very positive for zinc consumption," said David Wilson, an analyst at Societe Generale. "The auto sector globally is picking up strongly."

Autos data in January was impressive, with China's passenger car sales jumping 115.5 percent on the year and Indian monthly car sales hitting a record high. US car sales are also improving.

Short-term government-backed car scrappage schemes worldwide aimed at boosting flagging economies have helped auto sales to swell, but analysts see real demand improving as well as world economies emerge further from recession.

Zinc prices neared US$2,200 (HK$17,160) a tonne on Friday. Prices have shed some 15 percent so far in 2010 on concerns about Chinese monetary tightening, while worries about debt-laden Greece have spurred the dollar and made metals costlier for non- US buyers.

But China's demand remains strong, as hefty infrastructure spending forges on in the world's top base metals consumer.

Zinc hit US$2,736 in early January, its peak so far this year and its highest since March 2008, while its low so far in 2010 was US$1,935 on February 5. In November 2006, prices hit a record high of US$4,580 tonne.

In response to a better demand outlook, premiums in Europe - the amount paid by consumers over and above the LME cash price to cover the costs of shipping and delivering metal - have risen to about US$110 from US$60 a year ago.

On the downside, though, the OECD construction sector is still struggling, with commercial construction likely to remain a weak spot in the US economy in 2010.

But a Reuters poll shows the global zinc market looks poised to register a surplus of about 200,000 tonnes this year.

"About 550,000 tonnes of smelting capacity outside of China has been restarted over the past six months or so because of the improvement in prices, so we are seeing global zinc production recover and that recovery is going to gain momentum," said Gayle Berry, an analyst at Barclays Capital

Highlighting over-supply, zinc stocks at LME warehouses have jumped 50 percent in the past 12 months, to about 542,000 tonnes versus some 352,000 tonnes last February.

And stocks rose 90 percent in 2009. Top zinc producer China - whose year- on-year output of refined zinc jumped 11.6 percent to 4,416,100 tonnes in 2009 - has already restarted a substantial amount of idled capacity.

With many Chinese restarts out of the way, the next big threat to zinc prices is the great potential for reactivations in Europe and North America.

Big European producers such as Sweden's Boliden and Belgium's Nyrstar have been working on raising output.

"There's a fair amount of idled capacity still out there - maybe 500,000 tonnes," said Robin Bhar, an analyst at Credit Agricole, who sees zinc hitting a 2010 high around US$2,800 in the second quarter, and a low of around US$1,800 later in the year. "That's the big risk. If producers prematurely restart and flood the market you potentially will see the market surplus building, and that will put pressure on prices," Bhar said.

Source: REUTERS

[winston]

Another Commodity Set to Fall in Price By Matt Badiali

As I've been writing to you about the coming fall in the price of copper, I've been researching the entire base-metals complex.

"Base metals" is the term used for the workhorses of the metals complex. They aren't flashy, like gold or silver. In addition to copper, we're talking zinc, tin, and nickel. These metals are used in steel production and various manufacturing applications.

I think they're all going to fall in price soon...

I've spent the last two essays telling you that "reported" copper stockpiles are near extraordinary highs right now... and several insiders believe there's even more "unreported" copper supply held by speculators and hoarders in China. But it's not just copper being hoarded...

Take zinc for instance. Zinc is a base metal whose chief application is for galvanizing steel to prevent rust. Like every base metal, the supply-demand dynamic follows a simple pattern. When people don't want something, prices fall and warehouses fill up. And when something is in demand, prices rise and warehouse supply plummets.

Here's how that's played out over the last decade...

From 2001 to 2004, you couldn't give zinc away. The warehouses filled up and the price languished around $0.35 per pound. The market hated the metal so much that one zinc company, called Zinifex, paid an 18% dividend and traded for the ridiculously cheap price of two times earnings (most mining concerns usually go for eight to 15 times earnings).

Then, in early 2005, the manufacturing and construction boom began to consume the supply of zinc in the warehouses... and the price started to climb. It soared up over $2 per pound. That's an astronomical 470% rise in five years.

As the building boom waned in 2007 and the credit crash hit in 2008, zinc underwent a huge decline. By late 2008, the price had fallen back to $0.50 per pound... and supplies in the London Metal Exchange warehouse had ballooned from 62,650 metric tons at the price peak to over 345,000 metric tons.

In late 2008, the price of zinc began to climb again... but so did the stockpiles in warehouses.

Since then, the price of zinc has more than doubled, from $0.50 to $1.12. And we've added another 200,000 metric tons to storage, for a total of 540,000 metric tons.

This doesn't make sense.

In the last 17 years, the price of zinc never moved in step with the supply... until now. Today, zinc buyers are pushing prices up. But they're not actually using the stuff. Take a look...

The price of zinc shouldn't rise with more supply, unless it's driven by speculators betting on inflation.

Speculators are betting the value of paper money will fall, relative to "real stuff." So they're borrowing paper money and buying hard assets, like zinc.

According to the London Metal Exchange, the world produced about 11.3 million metric tons of zinc in 2007. So... with 540,000 metric tons in storage, we have about 5% of the world's annual zinc production locked up in the London Metal Exchange warehouses alone.

That's like making all the zinc mines in the world send their metal to the warehouses for three weeks straight.

I think this is hoarding for profit. Speculators are buying zinc to bet on a price increase. However, as with any commodity, when hoarders get their fill, it only takes a lack of buying to hammer the market.

Historically, when you have over 500,000 metric tons in storage, the price of zinc should be around $0.50 per pound... that's a 50% decline from here.

There are no liquid "pure plays" on zinc prices for U.S. investors. I'm writing this to illustrate that most of the base-metals complex is a center of hoarding right now... prices have skyrocketed as a result. Make sure you don't own any of the stocks that will suffer from a price collapse. And make sure you're around to pick up bargains after the inevitable decline.

http://www.growthstockwire.com/

[millionairemind]

It easier to visualize with a chart.

[winston]

Not vested

DJ China SRB Sells Zinc Ingots At Discount To Spot Prices

SHANGHAI (Dow Jones)--China's State Reserve Bureau sold 49,993 metric tons of zinc ingots from its reserves in a tender on Nov. 9, the country's top economic planner said Friday.

The SRB said early November that it would sell 50,000 tons of zinc ingots in the spot market, the National Development and Reform Commission said in a statement.

The average sale price was CNY19,511/ton, with prices ranging from CNY19,110/ton to CNY19,750/ton, it said.

The average price represents a discount of 2.2% to current spot prices--quoted around CNY19,950/ton on the Shanghai Metals Market Thursday.

The SRB, China's strategic stockpiling arm, bought 159,000 tons of zinc ingots from overseas markets last year after prices tumbled during the global financial crisis.

Source: Yue Li; Dow Jones Newswires

[winston]

Shanghai Zinc falls by daily limit of 5%

[winston]

Not vested

DJ MARKET TALK: Zinc Prices May Pull Back On Higher Supplies -BNP

0258 GMT [Dow Jones] Zinc prices may pull back in the coming months as present-day fundamentals are not only poor, but have been "deteriorating" in recent months, says BNP Paribas; "the most visible manifestation of this is the escalation of exchange stocks."

It estimates stocks are up by almost 400,000 tons since August 2010. BNP says inventories are likely to continue to rise for a while to "truly alarming levels". It adds not until 2013 is there a "real chance of a reversal, unless producers initiate fresh cutbacks."

LME 3-month zinc is trading at $2,140.25/ton, down $10.75 from the previous close. The house also says that its "poor" fundamentals suggest the metal will continue to "suffer more than most in risk-off corrections."

BNP expects zinc prices to average $2,360/ton in 2011 and $2,650/ton in 2012.


Source: Dow Jones Newswire

[winston]

Zinc Glut Expanding to Almost Two-Decade High Threatens Rally: Commodities

The largest glut of zinc in almost two decades is threatening to curtail a rally in prices as record production expands inventories to the highest since at least 1984.


http://www.bloomberg.com/news/2012-02-1 ... ities.html