Zinc

[Lone Clone]

Abare predicts zinc prices to increase on higher demand

Source: Hoovers

http://metalsplace.com/metalsnews/?a=10571

Prices of zinc are expected to increase 7% on year to an average of $3,500 a metric ton in 2007 as demand continues to outstrip supply, a report by the state-run Australian Bureau of Agricultural & Resource Economics, or Abare, said Tuesday.

With global zinc demand expected to outstrip output for the fourth year in a row in 2007, there may be a further drawdown in global zinc stocks.

The report added that toward the end of 2007, zinc prices, in real terms, may fall as increased production from mining projects such as San Cristobal in Bolivia boosts supply.

The report said increases in global output in 2007 will come from a number of mine expansions and new projects.

Among the major projects, San Cristobal in Bolivia, with a capacity of 167,000 tons a year, and Cerro Lindo in Peru (110,000 tons/year) are both due to be commissioned in the third quarter of 2007.

Over the medium term, four large confirmed projects in Canada, Mexico, the Russian Federation and Indonesia are projected to come on line, adding 700,000 tons to global production.

In Canada, three projects are due to start in 2007, which will boost Canadian output in the short-term by around 120,000 tons.

However, the report added that a lot of the new zinc mining projects are being developed in countries with relatively high sovereign risks, such as where operating rules or taxation arrangements may be altered after a project has started.

Such risks are creating greater uncertainty about returns for mining companies exploring in these countries.

Turning to Australia, it said mined zinc output in 2006-07 is estimated to be 1.38 million tons, following the expansion of the Mount Isa zinc concentrator and the Golden Globe project. There was no comparative figure.

It said a slew of new mining projects is expected to raise zinc output in Australia at an average of 9% on year until the financial year ending June 30, 2012.

The largest of these projects is Xstrata's Lady Loretta in Queensland, expected to commence production in the fiscal year ending June 30, 2010.