According to Barclay's the grade at Century are falling and they will be lucky to produce 300,000t in 2014, down from 500,000t per annum.
Chinese zinc imports witnessed a 47% growth Year-on-Year in January 2012, as per the latest customs data. January 2012 imports were at 47,933 MT. China is one of the largest consumers of zinc in the world. At the London Metal Exchange (LME), zinc prices climbed from about $1800/tonne in early January to reach a peak near $2200/tonne by Jan-end. But the metal has declined ever since and is currently trading just above $2000/tonne. Various factors are attributed to this surge in Chinese imports, primarily being the decline in treatment charges paid to smelters. Wider spread between LME and domestic prices and the appreciation of the Renminbi are also pointed out as contributors to the robust demand.
A recent Barclays report suggests that Zinc markets may be in for a tightening. “The three likely causes for this shortfall are: mine closures (such as Brunswick 215Ktpy, Perseverance 135Ktpy); steep declines in ore head grades (the reason for the almost halving in Century’s production in 2014 to 290Ktpy); and an expected decline in Chinese production growth. We expect this trio of supply issues to culminate in a rapid tightening in metal supply and a period of much higher prices to develop in 2013 onwards”, the report states. Barclays expects LME zinc prices to average 41950/tonne in Q1, 2012 and $2138/tonne in 2012 as a whole. Source: Commodity Online
KZL Price at posting:
16.5¢ Sentiment: Buy Disclosure: Held
