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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
 Posted - 07/20/2007 : 19:59:25
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A little zinc news for a change of pace…
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Galvanising value - Russia's zinc players hit the stage
Russia has only just woken up to the size of its undeveloped zinc reserves, and the low valuations they are getting.
Author: John Helmer
Posted: Thursday , 19 Jul 2007
Key excerpts:
MOSCOW -
A man without enough zinc is likely to suffer from a loss of taste, smell, hair, and sexual arousal. It's the zinc in oysters that is one reason, at least, for their popular association with libido.
For miners of the bluish-white metal, however, global insufficiency is proving to be very good for business. Although it is one of the most abundant of the minerals buried in the earth's crust, and one of the most common in metal applications, the scarcity of zinc can be blamed on the Chinese - and not because they think its libidinal value is as good as rhinoceros horn, or tiger's tooth.
In the year 2000, China's share of global zinc consumption was 15%.
Five years later, it had risen to 27%, dwarfing everyone else.
Annual growth in Chinese demand was 20% between 2003 and 2005, 13% in 2006, and 9% in 2007.
Total global consumption of zinc (refined) this year is estimated to be 12 million tonnes.
Mine and smelter supply looks like reaching 11.86 million tonnes, roughly matching demand.
But the three past years of deficit of supply have caused a halving of estimated zinc stocks, including London Metal Exchange (LME) measured stocks.
The effect is obvious - the price of zinc has rocketed. It was $1,084 per tonne in 2004; $1,382 in 2005; averaging $3,267 in 2006, with a record high of $3,990 in May of that year; and this year, with a forecast correction, the average price is expected to be $3,600. This week's price is about $3,520.
Several of these companies have increased their attributable zinc output by acquiring other companies, or their zinc divisions. In 2003, Xstrata took over MIM, and Boliden Outokumpu; in 2006 Glencore acquired Kazzinc, and Lundin Mining, Eurozinc. Three months ago, Zinifex and Umicore announced their intention to merge their zinc businesses into a single company to be called Nyrstar. None is a pure zinc player, and none is sitting on top of global sized zinc reserves.
The location of the largest reserves of zinc in the world is a matter of debate. Russian experts claim their country's reserves range between 32 million tonnes and 46 million tonnes. At the top end, these would make Russia the leading stockist, followed by Australia with about 17% of the global aggregate, and Kazakhstan with 34 million tonnes. Canada and India trail with 23 and 18 million tonnes apiece. China ranks 6th on the reserves table, with 16 million tonnes.
The paradox of sitting on so much undeveloped, unvalued mineral wealth did not bother Soviet resource planners; they went out of business in 1991. The paradox did not become apparent again, this time as an entrepreneurial opportunity, until steelmakers began to rebuild their domestic markets, and the revival of manufacturing created more Russian demand for zinc coatings than the refineries were able to provide. Until the past five years of rapid growth in demand, there was little incentive for Russia to develop over one hundred zinc deposits that were identified in the Soviet period. Mine output, on 2005 data, was 177,000 tonnes, ranking 12th in global terms. In refining, Russia dropped to 17th, with production of 206,000 tonnes.
Two-thirds of Russian consumption is driven by the need for galvanized steel used in construction and auto manufacture. Chemical applications of zinc account for 14% of consumption, and brass manufacture, 9%. Russian steelmakers have been adding to their coated steel line capacities, and turning out hot-dip galvanized product at a 19% rate of compound annual growth. This has fired growth of demand for zinc supplies to the steelmills, of at least 10% this year.
The zinc catch-up started in earnest in 2006, when the federal government put up for auction two mining licences with almost 3 million tonnes of zinc reserves. This year, development of another 3 million tonnes of reserves at four Altai region deposits is due to start. A combination of speculative factors, asset synergies, and mineral diversification has drawn the no.2 and no. 3 Russian copper miners, Urals Mining and Metallurgy Group (owned by Iskander Makhmudov) and the Russian Copper Company (Igor Altushkin), to accomeulating zinc deposit licences, which Zhukov terms "possibles" for mine development.
If demand becomes greater than supply, methinks our zincs might go back up to face value or a little more.
I should have chosen "Cut-n-Paste" as a forum name, since that is what I do, mostly.
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Edited by - pencilvanian on 08/31/2007 20:04:32 |
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