Zinc Price to Average Higher, Standard Bank Commodity Strategists: Zinc Price to Average Higher, Standard Bank Says
Aug. 11 (Bloomberg) -- Zinc, used to rust-proof steel, may average more than double last year's price as stockpiles fall and demand exceeds production, said Standard Bank Group Ltd., Africa's largest lender.
``The tightness in supply is unlikely to ease soon as the demand scenario is very strong,'' Standard Bank's Gursharan Randhawa said from London in an Aug. 9 interview.
Prices of zinc rose to record $3,907 on May 11 as London Metal Exchange inventories halved this year on growing demand from China, the world's biggest user of the metal. Demand for zinc in the world's fastest growing major economy may rise 7.3 percent this year, exceeding the 3.6 percent growth in output, according to Beijing Antaike Information Development Co.
Zinc for immediate delivery may average $3,050 a metric ton, or $1.38 a pound, compared with $1,382 last year, the Johannesburg-based bank said in an Aug. 2 report. That's a third higher than the bank's forecast in April. The estimate may be revised again on supply concern, Randhawa said in the interview.
The metal, which has fallen 14 percent from the May peak, is the second-best performer this year of any of the six metals traded on the London Metal Exchange. The metal fell 3.5 percent to close at $3,360 yesterday.
`Concentrate Shortage'
World output of zinc was 120,000 tons less than demand in the first five months of the year due to a shortage of zinc concentrate, the International Lead & Zinc Study Group said July 20. Production fell short of demand by 98,000 tons in the year- earlier period, the group said.
``The concentrate market is still very tight and continues to constrain capacity utilization at refineries,'' Standard Bank said in the report. ``This will be the case at least until 2008.'' Output may expand 2.4 percent this year, less than the 3.4 percent growth rate in consumption, the report said.
Standard Bank's forecast is lower than the estimate made by National Australia Bank Ltd. Zinc prices will average $3,120 this year, Gerard Burg, the bank's economist for minerals and energy, said yesterday. The forecast is 12 percent higher than the previous estimate and more than double last year's average.
To be sure, a slowdown in global economic expansion because of higher interest rates may slow demand, the bank said.
The U.S. Federal Reserve suggested it may increase rates after keeping the benchmark rate on hold Aug. 8 for the first time in two years. China's government said last month it will curb lending after the economy grew 11.3 percent in the second quarter, the fastest in more than a decade.