ZINC-Major market developments in November

LONDON, Dec 7 - Global zinc prices will continue to run ahead of the market's still poor fundamentals for now but they will have to correct lower at some point, analysts say.

"People clearly believe in this rally for the moment, but our medium term view is that at some point next year prices will fall to reflect weak fundamentals," said Giles Lloyd of industry consultants CRU Group.

Independent consultant Angus MacMillan said prices could rally near term, but he viewed any upsurge as a selling opportunity.

"It's hard to escape the conclusion that zinc is heading for a big surplus in 2010," he said.

Demand remained weak and there was no hope of a significant pick-up outside Asia in 2010, he added.

Nikos Kavalis, senior analyst at GFMS Consulting said he saw the downside risk for zinc prices exceeding the upside in the next few months.

But he did not envisage sharp declines, given that "positive views" on the copper market's medium-term prospects would filter through to other base metals.

At 1427 GMT the London Metal Exchange three-months zinc price <MZN3> was indicated at $2,309/19 a tonne.

Below are some of the more significant recent developments in production, stocks and prices that may influence the direction of the market in the rest of 2009 and into 2010.

PRODUCTION:

Nov 30 - Brazilian conglomerate Votorantim said the expansion at its Cajamarquilla zinc refinery in Peru should be up and running by February next year. The $500 million upgrade is forecast to lift the plant's capacity to 320,000 tonnes from 160,000 tonnes. In September, the company said the upgrade would be completed by the start of 2010 and before that, Votorantim had predicted the expanded plant would be running by the end of 2009. [ID:nN30462353]

Nov 26 - Antamina and its union signed a new three-year labour contract, ending four months of tense negotiations and erasing the spectre of a strike at one of the world's largest copper and zinc mines. The deal replaces one that expired in late July. [ID:nN26393774]

Nov 23 - Mining group Minmetals needs to conduct a battery of tests along its damaged Australian pipeline before setting a date to restart zinc concentrate shipments from its Century mine, the firm said. [ID:nSYD479183] The mine, the second largest of its kind in the world and accounting for a third of Australia's total zinc output, ran out of concentrate at its shipping port last week, prompting buyers to look for alternative sources. [ID:nSYD71227] On Dec. 3, Minmetals said engineering work on the pipeline was complete, but was unable to say when the flow of concentrate would resume. [ID:nSYD479829]

Nov 19 - Canada's Nevsun Resources <NSU.TO> pumped $21.7 million during the third quarter into its Eritrean Bisha project, the project's general manager said. Set to become the nation's first producing mine, Bisha's 27 million tonnes of ore is believed to contain 1 million ounces of gold, 700-800 million pounds of copper and 1 billion pounds of zinc. [ID:nLJ358670]

Nov 18 - The global zinc market was in surplus by 341,000 tonnes in the first nine months of 2009, the International Lead and Zinc Study Group's latest monthly bulletin showed on Wednesday. Global refined zinc use was 7.911 million tonnes in the January to September period, down from 8.737 million a year earlier. World refined zinc output was 8.252 million tonnes, down from 8.762 million in the same period last year. [ID:nLI112176]

Nov 11 - China produced 3,518,200 tonnes of refined zinc in the first 10 months of the year, up 5.8 percent from a the same period last year, figures from the National Bureau of Statistics showed. Production of mined zinc fell by 7.7 percent over the same period to 2,437,900 tonnes over the same period. [ID:nAPI000603]

Nov 6 - Canada's Breakwater Resources <BWR.TO> said it is considering reopening its Langlois zinc mine in Quebec, but is also facing fire damage and a possible strike at its Myra Falls mine in British Columbia. [ID:nN06248946] Strike averted after labour deal reached on Nov. 9. [ID:nN09271415] Production restarted at the site on Nov. 18 [ID:nWNAB7682]

PRICES

Zinc prices made further headway in November, ending the month at $2,312 a tonne from $2,170 a month earlier.

The month's high of $2,313.75 was reached on Nov. 18, boosted by strength in other metals on strong investment money flows into the complex.

Three-months prices suffered a setback and fell to $2,130 later in the month as worries about Dubai debt default boosted the U.S. dollar and investors recoiled from risky assets such as commodities and equities.

The downturn was short lived and prices reached $2,441 a tonne, their highest since March 2008, although they have eased on resurfacing demand worries.

In July, the twice-yearly Reuters base metals price poll [MET/POLL] put the median average for the LME cash zinc price <MZN0> at $1,420 a tonne, up from the January forecast of $1,212.50 a tonne.

STOCKS

After dipping in October, LME zinc stocks resumed their uptrend in November, ending the month at 455,275 tonnes, up from 428,525 tonnes a month earlier.

LME stocks are around their highest in four years and equate to around 15-1/2 days of demand.

Zinc stocks in Shanghai warehouses rose to 166,816 tonnes from 145,536 tonnes a month earlier.

Western world commercial stocks totalled 901,700 tonnes or 8.0 weeks of demand at the end of September, down slightly from 909,300 tonnes or 8.1 weeks the previous month, but well up from 764,000 tonnes or 6.0 weeks at the end of last year.

For a graphic on LME zinc stocks and three months prices click on: http://graphics.thomsonreuters.com/129/LME_ZNC1209.gif

(3000 Xtra users can access Reuters Metal Production Database by clicking on http://mpd.session.rservices.com. MPD details historical and predicted output and capacity for bauxite, copper, lead, zinc and gold mines, alumina refineries, aluminium, copper, lead and nickel smelters and copper, zinc, lead and nickel refineries between 1997 and 2012.)