Zinc plays catch-up with other metals

While not quite emulating the price run-ups experienced of late by copper and nickel, zinc has seen its price rise and, according to the securities firm Shearson Lehman Hutton, is trading at its highest level since the middle of 1984.

High grade zinc, which traded for an average New York price of 42 cents (US) per lb in 1987, and 38 cents the year before that, was recently listed by Hudson Bay Mining & Smelting at 52 cents . And overseas, the European producer price, which averaged $820 per tonne in 1987, was recently quoted by Falconbridge Ltd. at $970.

“Against a background of firm demand in the galvanizing sector — yet another indication of the general strength of the world steel industry — zinc is experiencing a set of supply disruptions which are so familiar to this market,” Shearson writes.

In northern Manitoba, the company says, technical difficulties are affecting output at Hudson Bay’s Flin Flon smelter; a 2-week-long strike at Industrial Minera Mexico’s San Luis Potosi refinery ended in mid-March; and, in southern Italy, the Pertusola smelter is reportedly a candidate for closure because of financial trouble.

“Factors such as these have in the past frequently pushed zinc prices up temporarily, but we suspect this time traders have also simply decided to turn their attention to this hitherto neglected metal,” Shearson writes.

While London Metal Exchange zinc stocks have been declining, producers’ inventories have been increasing. “As things stand, recent disruptions are likely to do no more than bring the zinc market into balance for 1988, and we therefore do not expect any significant drawdown in stock levels for the rest of the year,” Shearson reports.

The price is thought to be near its peak, although further supply problems could put upward pressure on the price of the base metal. Shearson considers the $1,000-per- tonne level “a major psychological barrier.”

Metals & Minerals Research Services is optimistic demand for zinc in 1988 will remain strong. The London-based firm reports demand for zinc in the non-Communist world grew by 2.4% in 1987; a 2.7% increase is projected for 1988. On the supply side, zinc production grew by 3.9% in 1987 and could grow by another 3.5% this year, the company says.

Helping to boost demand for the metal, Metals & Minerals reports, is an end to substitution in the automotive diecasting market, and a better-than-average growth in galvanizing.

Among the countries singled out for significant rises in mine production of zinc last year are Canada, Australia, South Africa and the U.S.

A lowered mine inventory and a rise in the price of mercury helped Placer Dome to decide in favor of reopening its McDermitt mine in northwestern Nevada at the first of March.

The mine, which went into production in 1975, was closed down early in 1987 because of market conditions. At the time, a flask of mercury in Europe was selling for about $150(US), and in the U.S. for about $200.

Metals Week was recently quoting a European price near $300 and a New York price range of $345-$355.

At full operation, the McDermitt mine has a production capacity of 12,000-14,000 flasks per year.

The outlook for tungsten producers is not particularly rosy, according to Canada Tungsten Mining, which in 1986 decided to close down its mine in the Northwest Territories.

“Many tungsten mines have closed in recent years and further closures and cutbacks are likely,” the company writes in its 1987 annual report. “In the western world, mine production is in the region of one-half of what it was in 1985 and barely covers one-half of today’s concentrate consumption.”

The good news is that Western world inventories are declining. “The near-term outlook for consumption of concentrates in the company’s markets may be firming as Western economies move into the phase of the economic cycle in which expenditures on capital goods and machine tools are trending upwards,” Canada Tungsten writes.

While scheelite and wolframite prices have risen since 1986, the company considers current prices too low for it to resume production at its N.W.T. property.