We need base metal demand.I have been long for a few years, and continue to be long.
The reason... I think the world will need more base metals as the emerging economys grow....
and... spm is a small stable growing company
It is my opinion that if they simply progress step by step this stock will move higher.
My biggest concern is that the price of zinc is so high relative to the demand.
Other companys with marginal deposits become economical and more zinc is mined.
This would be fine if the price was being driven by demand.
I don't like to see the LME inventory of zinc going continuously higher.
This can't go on forever without driving the price back down.
On the other hand... the amount of zinc in inventory, if measured by days of global demand, does not look so bad.
When this stock was around $2 not only where base metal prices good, but they where being driven by demand.
I am long term bullish for spm but expect a volitile ride.
The following is something I found while googling Zinc Demand and is an example of why I expect the sp to be volitile.
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Although the inventory build has reversed recently, as the above graph from HSBC shows, the bank suspects that like aluminum, much has moved off warrant and hence is no longer visible (rather than having been consumed). Nor is China consuming all that it is importing and producing; SHFE exchange inventory has risen to 326,000 tons this year, a life-of-contract high and as Reuters suggests implies the market is saturated. Andy Home at Reuters suggests imports are being driven more by day traders playing the arbitrage market between London and Shanghai than by underlying demand – hence the build-up in inventory and high imports when domestic production is sufficient to meet domestic demand. Indeed, with the global zinc market in persistent surplus, Neil Buxton, managing director at GFMS Consulting, said, “The stock levels we see at the moment are likely to stay with the industry for the rest of this year and if that’s the case I don’t think that justifies prices at current levels.” For sure, if there are tangible signs of China slowing this year zinc could be one of the first casualties. Significant price falls will be needed to close sufficient capacity to bring the market back into balance, with prices of around $1500 per ton according to Graham Deller of CRU. While that is not in the cards under current conditions, zinc does look the most vulnerable of the LME metals and price falls are more likely than significant price rises in 2011.
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Still long but with eyes open wide.