ZINC 0.08% $2,575.9 zinc futures

zinc likely to extend gains...

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    Source: www.financialexpress.com

    Zinc likely to extend gains: RBC Capital

    Posted online: Saturday, October 28, 2006 at 0000 hours IST

    OCT 27: Prices for zinc, used to rust-proof steel, may average 9% more next year, beating other industrial metals such as copper and nickel, because of disruption to shipments from the US, RBC Capital Markets said.

    Zinc may average $1.50 a pound, or $3,306 a metric tonne, in 2007, up from this year’s average of $3,029 a tonne, analysts led by Toronto-based H Fraser Phillips wrote in a report on Thursday.

    “Zinc continues to be our preferred choice for base metal exposure,� the RBC team wrote. “We believe the price strength will last well into next year.�

    Zinc has more than doubled this year and rose to a record on the London Metal Exchange (LME) on Friday. The metal is the second-best performing commodity in 2006, after nickel, as output from producers lags behind demand led by China. Zinifex Ltd, the world’s second-largest producer, on Thursday reported a drop in production and said demand remains “strong.�

    Zinc inventories held in New Orleans, which holds 78% of stockpiles tracked by the LME, haven’t been shipped out of warehouses fast enough because it’s in the form of slabs, which isn’t suitable for galvanizing steel, RBC Capital said. Producers of galvanised steel accounted for 55% of global zinc consumption last year, according to the report.

    While zinc held at New Orleans is LME grade, the metal comes from different producers and therefore has varying “brands,� RBC Capital said. Consumers require specific brands of zinc because of the varying contents of other metals.

    “Physical� constraints prevent warehouses from exporting more than a certain amount of zinc each day, RBC Capital said. “The New Orleans material can be consumed by some users, but it will take time to move,� the analysts said. Most of the material currently being shipped is bound for Europe, they added.

    Zinc inventories in New Orleans suffered water damage after hurricane Katrina struck the city last year. All material has been cleaned since and is ready for consumption, RBC Capital said. Zinc for delivery in three months rose $54, or 1.3%, to an all-time high of $4,154 a tonne at 11:34am on the LME on Friday.

    Zinifex, based in Melbourne, said on Thursday that output fell 13% in the three months ended September 30 due to maintenance shutdowns at a smelter and its Century mine. Global zinc demand was already forecast by Societe Generale to outpace production by 4,20,000 metric tonne this year.

    LME-monitored inventory that can be tapped by consumers to fill the production short fall has dropped to a 15-year low.

    Prices of industrial metals have soared in the past three years partly as China’s booming economy stokes demand for the raw materials needed for factories, cars and appliances. Nickel has more than doubled while copper is up 88% this year. China’s economy expanded 10.4% in the third quarter.


    Cheers, Pie
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