The Zinc Thread

China demand causes rising zinc supply deficit - AME
30 December 2004

SYDNEY: China was leading a resurgence in demand for zinc, forcing a likely global supply deficit this year to widen in 2005, researchers in Australia said.

Zinc prices have vaulted 54 per cent in 2004 to a five-year peak as inventories receded thanks to re-stocking by steelmakers, who covet the alloying metal for its anti-rusting qualities in galvanising steel beams and sheets.

AME Mineral Economics puts this year's supply deficit of refined zinc – the first since 1999 – at 260,000 tonnes but expects the shortfall to rise to 280,000 tonnes next year.

The forecast for 2005 is based on global consumption growth of 6.4 per cent to a total of 10.48 million tonnes, AME said.

AME's forecast for 2005 was running ahead of commodities strategists at Deutsche Bank, who peg next year's worldwide shortfall at only 150,000 tonnes.

Zinc's rising star has helped push shares in world number three producer Zinifex 35 per cent higher to $A2.35 since it listed on the Australian bourse in April.

China – which has added the equivalent of the entire United States steel industry in the past three years – was leading global demand for zinc, with consumption in 2004 rising 13.7 per cent, according to AME.

Second was the United States, where demand grew 9.2 per cent, AME said.

Demand for zinc in Western Europe grew 2.6 per cent, marking the first time the region saw growth since 2000, AME said.

Inventories held in warehouses sanctioned by the London Metal Exchange, where the benchmark three-month zinc contract & last fetched $1,230/$1,240 a tonne, are down about 9 per cent this year.