POLL-Surfeit of Metal to Hit Zinc Price Performance-Shanghai Metals Market

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POLL-Surfeit of Metal to Hit Zinc Price Performance

Industry News 10:51:33AM Jul 22, 2010 Source:SMM

LONDON, July 22 -- Zinc's price performance this year is likely to be worse than previously expected as the market factors in a deluge of supply for the metal used to galvanise steel, a Reuters survey showed.

The survey of 55 metal analysts taken over the last four weeks showed copper was expected to average $6,878 a tonne this year from $7,077 a tonne in the January poll. For aluminium the number was an unchanged $2,094 a tonne.

For lead the average forecast fell to $1,996 a tonne from $2,252 in January. Nickel was seen higher at $20,225 a tonne from $18,186 and tin at $17,548 from $16,294.

Zinc prices are now expected to average $2,050 a tonne this year from $2,293 a tonne in January. Cash zinc was around $1,800 on the London Metal Exchange on Tuesday.

"I'm a little concerned about zinc," Justin Lennon, analyst at Mitsui Bussan Commodities said.

"The price has brought a lot of production back online in zinc and supply has gotten ahead of demand. There also seems to be some expansion in zinc production out of India."

Zinc prices are up more than 15 percent since early June when a stronger dollar and escalating worries about contagion from the debt crisis in the euro zone hit confidence.

The price gain meant plans to cut output have been shelved by many producers, leading to higher forecasts of the surplus in a market estimated at around 12 million tonnes this year.

The survey showed the zinc surplus this year could hit 348,000 tonnes versus 209,500 tonnes in January.

"We've had a large build up of inventory over the past year or so and what we see in terms of visible stocks is just the tip of the iceberg," said Stephen Briggs, analyst at BNP Paribas.

Briggs was referring to stocks in warehouses monitored by the Shanghai Futures Exchange where inventories stand at more than 248,000 tonnes and in LME registered warehouses where the number is 618,925 tonnes -- near the five-year high seen in May.

However, helping support zinc market sentiment are financing deals, which have tied up a significant amount of metal in LME warehouses. These deals are designed to release cash for producers and earn higher returns for banks than is possible elsewhere.

DOUBLE DIGIT GROWTH

Prices of battery material lead are expected to see a lower average this year than previously, but the number is still higher than current levels around $1,800 a tonne.

Next year lead is expected to average $2,178 a tonne.

Analysts expect falling stocks in LME warehouses, down at 185,775 tonnes from eight-year highs of 193,000 tonnes hit mid-June, and stronger activity in the auto sector to help.

But doubts remain.

Global auto sales tumbled 13 percent last year, but auto makers and their suppliers have benefited this year from government support.

"Although global automobile production is forecast to grow at double-digit growth rates, new equipment batteries only account for 14 percent of global lead demand," said Catherine Virga analyst at CPM group.

"This small market share may in turn contain growth in lead demand -- roughly 3.5 percent per annum -- over this two year period." She added: "Unreported stockpiles of nickel in China are helping to keep the apparent nickel market very tight."

Nickel is expected to average at $21,111 a tonne next year from January's $19,069, aluminium at $2,150 a tonne from $2,226, tin at $18,550 a tonne from $17,500 a tonne.

Cash nickel was at $18,730, aluminium at $1,950 and tin at $17,850.

Copper used as a gauge of economic activity is forecast to average $7,496 a tonne next year from $7,500 in January and compared with the LME cash price of $6,500 on Tuesday.

"Copper mine production growth is likely to struggle, which suggests there will have to be large draws in metal inventories to keep up with even a modest rate of demand growth," said Gayle Berry, analyst at Barclays Capital.

"As such we see the potential for copper prices to reach a new record high next year."

Three-month copper on the LME hit a record $8,940 a tonne on July 2, 2008.

 

Key Words:  zinc price  zinc Zn 

POLL-Surfeit of Metal to Hit Zinc Price Performance

Industry News 10:51:33AM Jul 22, 2010 Source:SMM

LONDON, July 22 -- Zinc's price performance this year is likely to be worse than previously expected as the market factors in a deluge of supply for the metal used to galvanise steel, a Reuters survey showed.

The survey of 55 metal analysts taken over the last four weeks showed copper was expected to average $6,878 a tonne this year from $7,077 a tonne in the January poll. For aluminium the number was an unchanged $2,094 a tonne.

For lead the average forecast fell to $1,996 a tonne from $2,252 in January. Nickel was seen higher at $20,225 a tonne from $18,186 and tin at $17,548 from $16,294.

Zinc prices are now expected to average $2,050 a tonne this year from $2,293 a tonne in January. Cash zinc was around $1,800 on the London Metal Exchange on Tuesday.

"I'm a little concerned about zinc," Justin Lennon, analyst at Mitsui Bussan Commodities said.

"The price has brought a lot of production back online in zinc and supply has gotten ahead of demand. There also seems to be some expansion in zinc production out of India."

Zinc prices are up more than 15 percent since early June when a stronger dollar and escalating worries about contagion from the debt crisis in the euro zone hit confidence.

The price gain meant plans to cut output have been shelved by many producers, leading to higher forecasts of the surplus in a market estimated at around 12 million tonnes this year.

The survey showed the zinc surplus this year could hit 348,000 tonnes versus 209,500 tonnes in January.

"We've had a large build up of inventory over the past year or so and what we see in terms of visible stocks is just the tip of the iceberg," said Stephen Briggs, analyst at BNP Paribas.

Briggs was referring to stocks in warehouses monitored by the Shanghai Futures Exchange where inventories stand at more than 248,000 tonnes and in LME registered warehouses where the number is 618,925 tonnes -- near the five-year high seen in May.

However, helping support zinc market sentiment are financing deals, which have tied up a significant amount of metal in LME warehouses. These deals are designed to release cash for producers and earn higher returns for banks than is possible elsewhere.

DOUBLE DIGIT GROWTH

Prices of battery material lead are expected to see a lower average this year than previously, but the number is still higher than current levels around $1,800 a tonne.

Next year lead is expected to average $2,178 a tonne.

Analysts expect falling stocks in LME warehouses, down at 185,775 tonnes from eight-year highs of 193,000 tonnes hit mid-June, and stronger activity in the auto sector to help.

But doubts remain.

Global auto sales tumbled 13 percent last year, but auto makers and their suppliers have benefited this year from government support.

"Although global automobile production is forecast to grow at double-digit growth rates, new equipment batteries only account for 14 percent of global lead demand," said Catherine Virga analyst at CPM group.

"This small market share may in turn contain growth in lead demand -- roughly 3.5 percent per annum -- over this two year period." She added: "Unreported stockpiles of nickel in China are helping to keep the apparent nickel market very tight."

Nickel is expected to average at $21,111 a tonne next year from January's $19,069, aluminium at $2,150 a tonne from $2,226, tin at $18,550 a tonne from $17,500 a tonne.

Cash nickel was at $18,730, aluminium at $1,950 and tin at $17,850.

Copper used as a gauge of economic activity is forecast to average $7,496 a tonne next year from $7,500 in January and compared with the LME cash price of $6,500 on Tuesday.

"Copper mine production growth is likely to struggle, which suggests there will have to be large draws in metal inventories to keep up with even a modest rate of demand growth," said Gayle Berry, analyst at Barclays Capital.

"As such we see the potential for copper prices to reach a new record high next year."

Three-month copper on the LME hit a record $8,940 a tonne on July 2, 2008.

 

Key Words:  zinc price  zinc Zn