Zinc, nickel prices to ‘move dramatically higher’ - Scotiaba
ZINC & NICKEL OUTLOOK
In her analysis, Mohr observed that a cyclical recovery is zinc and nickel is underway.
“Global supply and demand conditions for ‘refined’ zinc are in ‘deficit’ in 2014 (that is, world consumption of slab zinc exceeds production), pulling down LME & Shanghai Futures Exchange stocks by 20.8% since late 2013,” she noted. “Chinese imports of ‘refined’ zinc have jumped by 39.3% through July, given solid underlying demand growth—up about 7% in 2014, boosted by strong auto production (+9.4% YTD), the rising content of galvanized steel in cars to prevent rust (Chinese consumers are demanding higher-quality motor vehicles) and low operating rates at Chinese smelters (74%) due to weak treatment charges & poor profitability.”
Meanwhile, Mohr advises that while zinc concentrate supplies remain ample, “concentrates will likely also move into deficit by 2016, given significant mine depletion—for example, at Australia’s 480,000t Century mine in mid-2015, the world’s third-biggest zinc mine, and at Lisheen (132,000t) in 2016, after closures in 2013 at Brunswick (190,000t) and Perseverance (125,000t) in Canada.”
“Overall mine output should ramp up—Glencore’s McArthur River in Australia, Boliden’s Garpenberg in Sweden, reactivation of Teck’s Pend Oreille mine—after almost no gain in 2014,” Mohr forecast. “However, recent prices have not been high enough to ‘incent(ivise)’ sufficient new mine development (at least US$1.13 is required and much more, say US$1.60 late decade) to meet world demand.”
“Market conditions will become genuinely tight in 2016,” she cautioned.
In her analysis, Mohr suggested that a recovery in nickel prices is also underway and the metal should climb to US$10.75 per pound in 2015 and US$12 in 2016.
“The world supply & demand balance will shift into a market ‘deficit’ in 2015, as China depletes its inventory of Indonesian ore for Nickel Pig Iron production (used in stainless steel),” she forecast. “Prices will likely remain high until 2016:H2 when new processing plants become available in Indonesia; sixteen have been proposed, funded mostly by China.”
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