Zinc Markets Suffer, Lead Shows Hope

Zinc, thanks to its undefined profile, is undervalued, while lead appears bullish.

“It’s surprising that such a useful metal doesn’t hold more value in this society,” Graham White of Considar Metal Marketing Inc., Toronto, said of zinc. White spoke at the Spotlight on Lead/Zinc at the Institute for Recycling Industries Inc. (ISRI) Annual Convention in Las Vegas. 

White noted five causes that have lead to a destruction of shareholder value for zinc:

·         Cash cost project mentality

·         Relationship between the custom smelters and mines

·         Failure to cut down production during economic downturn

·         Impact of funds on zinc markets

·         China’s impact

White said that NAFTA and European Union markets for zinc boomed in 1998 during the Asian crisis, consuming 47.1 percent of the market. This forced the price down.

However, in the last year, China’s zinc mine production increased by 127 percent from 750 to 1710 kt. Net exports from China increased by 4,655 percent from 11 to 523 kt. White said these statistics are questionable, as much of the metal from China needs to be re-refined and is sometimes double counted.

White said China’s methods leave a lot to be desired and that mine production is expected to drop by 20 percent.

George Kleinman, president of Commodity Resource Corp., Reno, also addressed attendees. “I don’t know where the price is going,” he said, adding that lead markets can be dull for a while and suddenly get exciting.

Kleinman said he sees indications that the market is forming a bottom, though it appears to be acting irrationally.

He said that the market for lead is “potentially explosive to the upside,” whereas zinc needs stronger demand and a cutback in supply.