After years of dross, zinc miners are dancing--but to a wary tune

Mar 04, 2005 | 04:36 AM | Rory Carroll

The International Zinc and Silver Conference in Las Vegas kicked off in a celebratory mood--high zinc prices translated into smiles on the faces of nearly all 270 attendees.

"It isn't every year people can feel good about the zinc market," one trader said at the closing reception. Indeed. Zinc hasn't seen a rally like this since 1997.

Two years ago, the price of zinc was around $700 a tonne on the London Metal Exchange. Last year, every other base metal made gains except zinc. Today, the price is nudging $1,400 a tonne, and many believe it will go higher.

Still, fundamental problems in the medium- and long-term zinc market produced some uneasiness about the future.

Eliminating--or at least softening--the highs and lows of the zinc price was a popular idea. Now that the zinc industry has climbed out of its hole, everyone wonders how it can keep from eventually falling back in. And although there was lots of noise on the issue, few offered any realistic solutions.

Greg Gailey, managing director and chief executive officer of Melbourne, Australia,-based Zinifex Ltd., said that if mines respond to a high zinc price with increased production, they will reverse the positive fundamentals and topple the price. He preached restraint among zinc miners, but his words seemed empty.....