Downward trend for zinc

Mining Journal’s 20:20 Investor Series held a Zinc Day earlier this week at which zinc market expert Claire Hassall, of CHR Metals, opened proceedings on a somber note.

CHR Metals is an Internet-based provider of analysis of the lead and zinc markets and the 20:20 events are conference sessions aimed at giving participants up to the minute news on a specific mineral or situation.

The CHR research presented by Ms Hassall suggested that while there may be the occasional upward movement in the zinc price, the current downturn will continue for the next three years at least.

At best, work on some new projects may cease in response to a drop in the price, and thereby ease the downward trend.

According to Ms Hassall, zinc prices are expected to remain at or around current levels until the turn of the year, but as new production comes on stream, they could begin a long-term decline.

In the past 18 months the price of the metal has risen steeply and this can be attributed, in part, to several years of under-investment in the sector.

Growth in both the Chinese and Indian economies has increased demand for zinc, with China originally an exporter of the metal, but now a major importer.

It is estimated that growth in these two economies will increase zinc demand by four million tons a year between 2000 and 2010 and a further 4.1 million tons between 2010 and 2020.

However, the increase in overall global demand for zinc has now slowed to between 4% and 4.5%, as against 7.4% in 2006.

Whilst there are few major new zinc mines under development, increased production from existing operations are likely to put the market into surplus until around 2010.

In addition, long-term prospects for zinc may be damaged by the development of alternative products.

Investors and zinc miners will no doubt be mindful of the fact that zinc prices tend to be cyclical in nature and that the steep price rises of the past two years form only one part of that cycle.