Zinc price expected to surge in 2006Zinc price expected to surge in 2006
By XIAO YU in Beijing
ZINC prices may rise 35 per cent this year as demand outstrips production in China, the biggest user and producer of the metal, said Beijing Antaike Information Development Co, which advises the Chinese Government.
Zinc for immediate delivery may average US$1,860 (US$1 = RM3.75) a tonne, up from a previous forecast of US$1,406, Feng Juncong, an analyst at Antaike, said in a phone interview Thursday.
Zinc averaged US$1,379.8 a tonne in 2005.
Prices of zinc, used to coat steel to prevent corrosion, have risen to records on expectations China's expanding economy will require more metals, while smelter output in China has been disrupted by a toxic spill.
The amount of money in funds tracking commodity indices may rise 38 per cent to US$110 billion this year, Barclays Capital said this month.
"Production has been stymied simply because there is not enough raw material," said Feng, who has been tracking the industry for 12 years and correctly forecast China would become a net importer of refined zinc in 2004.
Rising zinc prices have benefited producers. Shares of Teck Cominco Ltd, the world's biggest zinc miner, have gained 92 per cent in the past year.
Antaike's forecast for this year is higher than the US$1,666 median estimate of 24 analysts surveyed this month. The estimate is lower than a forecast by Deutsche Bank AG's chief metals economist Peter Richardson, who expects zinc to average US$2,205.
Chinese consumption of zinc and zinc alloys is expected to rise 7.3 per cent to 3.25 million tonnes in 2006, while production may rise 3.6 per cent to 2.85 million tonnes, Feng said.
Forty-four per cent of the metal is used to make galvanized products such as steel and 15 per cent in batteries in China. The country's zinc production capacity exceeded 4 million tonnes in 2005, according to Feng.
China imported 35 per cent more of the refined metal last year to meet demand, fuelled by an economy that grew by 9.9 per cent and surpassed the UK to be the world's fourth largest.
Huludao Zinc Industry Co, China's biggest publicly traded zinc producer, and rivals turn zinc concentrate into refined metal.
Processing fees dropped to below zero due to the scarcity of zinc concentrates, Feng said.
Chinese zinc output fell 19 per cent in December after Shenzhen Zhongjin Lingnan Nonfemet Co, the country's third- biggest zinc producer, shut its Shaoguan Smelter after the discharge of cadmium exceeded safety levels in a nearby river. - Bloomberg