TORONTO Zinc and nickel prices are likely to trend down
in 2013 as global supply exceeds demand, according to an
analyst at Macquarie Capital Securities Ltd., even as one zinc
mining company claims the zinc price could skyrocket as high as
$1.70 per pound within a few years due to a lack of new zinc
Macquarie analyst Duncan Hobbs told the Prospectors and
Developers Association of Canada (PDAC) Convention in Toronto
on March 3 that the zinc market is suffering from
oversupply, keeping the global market under
Theres too much metal, theres too much
concentrate, Hobbs said. Weve heard time and
time again that zinc markets will be tight over the next few
years, but we feel there are enough projects in the pipeline to
meet any increase in demand.
Full Metal Zinc Ltd. chief executive officer Michael Williams
disagreed, however, claiming in his own presentation that
rising demand, significant mine closures and a severe
lack of previous mine development will lead to a zinc deficit
in the short to medium term.
Williams, whose Vancouver-based exploration company is
evaluating a zinc property in Alaska, said that the view of
zinc as coppers poorer cousin over the last
few years has resulted in a lack of significant investment in
the zinc mining sector.
With the higher margins on other base metals, companies
have been focusing their efforts on ABZ: anything but
zinc, he said. Raising money for a zinc project is
significantly more difficult than raising money for a copper
project. The good news is this exacerbates the supply
Williams said he believes that the catalyst for a supply
shortfall is right around the corner, forecasting that
some 12 percent of zinc supply will be lost within a few years
due to impending mine closures at Xstrata Plcs Brunswick
mine and China Minmetals Corp.s Century mine.
The deficit in 12 years could be seven million tons per
year, he said. I believe well get out of bed
one day and the zinc price will be $1.20 (per pound), and then
weeks later will be trading above $1.70.
On March 4, three-month zinc closed on the London Metal
Exchange at $2,014 per tonne, or 91.4 cents per pound.
Meanwhile, Macquaries Hobbs said that an increase of
global nickel smelting capacity over the next year was likely
to negatively impact pricing in that market as well.
In our view, nickel is headed for another year of
oversupply and prices are likely to come down as a
result, he said.
Hobbs claimed that pricing fundamentals are strongest in
markets where China doesnt already have supply in
the ground, such as copper.
Theres some doubt as to whether copper projects in
the pipeline can meet even moderate increases in demand,
Likewise, a dearth of primary lead mining projects outside
China will support lead prices in the long term, he added.
We think lead recycling already runs flat out. Outside of
China, theres no net growth in lead supply over the next
four years, he said. Lead demand looks pretty
solid. The major use of lead is in car batteries, and that
demand is unlikely to change any time soon.
Hobbs said that while sentiment was cooling on the Chinese
market in some areas, he expected the urbanization
of the Asian nation to continue to drive the base metals market
for years to come.
Theres still potentially a long way to go in their
urbanization story, he said.