Zinc Prices Soar as Global Production Tightens
09 Outubro 2015 - 4:28AM
Dow Jones News
By Biman Mukherji
HONG KONG--Zinc prices surged to a three-week high Friday after
the world's largest miner of the metal, Glencore PLC, announced
production cuts equivalent to around 4% of the world's total annual
supply.
But analysts said the longer-term outlook for zinc remains
shaky, amid ongoing concern about the strength of demand for the
metal used primarily in steelmaking.
Glencore earlier said it would cut its annual zinc production by
500,000 metric tons, including closing its Lady Loretta mine in
Australia and Iscaycruz mine in Peru.
Following its announcement, three-month zinc prices on the
London Metal Exchange rose 6.7% to an intraday high of $1,780 per
metric ton, before easing slightly to $1,775/ton. Lead, which is
mined together with zinc, was up 4.5% at $1,748.50/ton.
Friday's jump marks a sharp turnaround in the metal's fortunes
since it slumped to a five-year low of $1,601.50/ton on Sept.
28.
"We had a slight deficit and this...tightens up the market
significantly, " said Daniel Hynes, base-metals analyst at ANZ
Bank. "I think the rally has a pretty good chance of being
sustained, but there are demand side concerns."
Total global supply of zinc runs to around 14.5 million tons,
and the global market was estimated to be in deficit of around
150,000 tons this year before Glencore's announcement, he said.
China accounts for nearly half of total global zinc consumption.
The country's weak economic outlook has hit prices of the metal
hard this year. Chinese steel-producers, the largest in the world,
have stepped up their overseas sales as their output has started to
outpace domestic demand.
But establishing new markets overseas is proving to be
challenging as other countries have raised tariffs to protect their
own steel industries.
"If demand does not increase, then it would be tough for zinc
prices to sustain the momentum," said Daniel Ang, an analyst at
Phillip Futures. "Zinc is mostly used in complement with other
metals, and if prices of those metals don't increase, zinc won't
run past them."
Besides steel, zinc is also used with copper for manufacturing
brass.
Three-month copper prices on the London Metal Exchange also rose
to a two-week high of $5,257.50/ton on Friday, before dropping to
$5,245.50/ton in late Asia trade. The price gain was prompted by
dollar weakness after minutes from the Federal Reserve's September
policy-meeting showed it adopting a dovish tone on the economy,
which traders interpreted as a sign that interest rates won't be
raised soon.
However, the effect of a weaker dollar on copper is "unlikely to
last long," said Mr. Ang.
Prices of copper have been trading just above a six-year low,
even though Glencore last month said it would halt production at
two African mines that together produce 400,000 tons of copper a
year.
Write to Biman Mukherji at biman.mukherji@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
October 09, 2015 03:13 ET (07:13 GMT)
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