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LME zinc prices ‘must rise’ to encourage new mines: CRU

Keywords: Tags  zinc prices, CRU Group, Graham Deller, zinc mines, Andrea Hotter

CANCUN, Mexico — Zinc prices need to be as high as $3,000 per tonne in order to stimulate new mining projects, according to CRU Group analyst Graham Deller.

"Miners need to believe that $3,000 (per tonne) is a price they can obtain," he said at the International Zinc Association conference in Cancun Mexico. "Zinc prices need to be 50 percent higher than last year."

The London Metal Exchange cash special-high-grade zinc price closed the official session Feb. 27 at $2,084 per tonne.

The concentrates market could fall short of demand from smelters by around 3 million tonnes by the end of the decade, Deller said, but this could rise or fall depending on such factors as the level of treatment charges set during annual negotiations. "The real zinc price must rise to induce more mines on-stream," he added.

But the path to higher prices is far from clear.

"Zinc prices have been moving recently due to a growing confidence in the world economy, and in particular faith in China," Deller said.

But continued growth in China might see smelters boost output and seek more concentrates, thus further widening the gap in availability, he added.

There can also be other consequences of higher prices, including the potential for choked demand or the extension of mine lives.

At the same time, recent improvements in LME zinc prices could prove to be a "false dawn," Deller said.

Miners attending the conference argue that the concentrates market is in deficit, and not in surplus as smelters claim.

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