Zinc may breach the $1.50/lb mark within five years

Zinc may be headed for the $1.50/lb-mark by 2016, buoyed by an approaching supply bubble, mining analysts at Hallgarten & Company said in a research note.

The company said that since iit bottomed in 2008, zinc had rebounded to over $1/lb, only to slip back during May 2010 when the first wave of European economic woes surfaced, and then again on the recent global market weakness.

The metal seems to have found stability in a band of between 85c/lb and $1/lb.

“This relative stability is good but not much consolation to anyone in the space. This includes end-users. The zinc complex has needed a sustained recovery in prices to tease new projects off the drawing boards and into the financing phase,” the company said in a research note.

Analysts said there is no new significant production scheduled to come on line during the next three years, except for strong byproduct credits from silver and lead mines, while many significant zinc mines are scheduled for exhaustion by 2015. Mine closures are expected to result in a net loss of about 1.4-million tons of zinc over the next few years.

In Canada, the Xstrata-owned Brunswick and Perseverance mines are destined to close in 2013, after Brunswick mine had already been stretched beyond its original life-of-mine.

A shutdown of the two mines would remove a combined 350 000 t of yearly metal capacity.

To counter such closures there are new mines such as Glencore’s Perkoa project, in Burkina Faso, with a capacity to produce about 90 000 t/y and Talivivaara, in Finland, at just over 25 000 t/y.

“Mega-mines that lasted for decades, are, in modern times, being replaced by much smaller mines with more limited mine lives,” the analyst said.

Source: Creamer Media Reporter

Zinc prices may remain soft in H2, 2012: Barclays

NEW YORK (Commodity Online): The zinc market was characterised by another year of surplus in 2011, leading to reported inventories rising by almost a quarter. As a result, zinc lived up to expectations for it to be an underperformer, and the outlook for fundamentals in 2012 suggests that it will continue to underperform.

-Production is expected to grow strongly this year and, as a result, the market will likely remain in surplus. Indeed, there will be new highs for zinc inventories in 2012, making for a soft outlook for prices, especially in the first half of the year.

-The potential for a sharp slowdown in the Chinese property market is a risk for zinc demand this year, with residential construction accounting for just over 10% of Chinese zinc consumption. Demand from the sector may slowdown, but will still probably grow at a healthy rate, driven by an estimated 15% growth in property investment in 2012.

-The key swing factor for the zinc market outlook over the next few years is supply. While currently plentifully supplied, a medium-term concentrate crunch may be looming, although the timing and extent of this will be partly defined by prices (high prices will encourage marginal production).

The three likely causes for this shortfall are: mine closures (such as Brunswick 215Ktpy, Perseverance 135Ktpy); steep declines in ore head grades (the reason for the almost halving in Century’s production in 2014 to 290Ktpy); and an expected decline in Chinese production growth. This trio of supply issues may culminate in a rapid tightening in metal supply and a period of much higher prices starting 2013

Zinc prices are expected to average $1950/tonne in Q1, 2012

Source: Barclays Capital Research