Market Briefing - July 21, 2008

Zinc prices remained on a downward trajectory over June, hitting a new 2½ year low of $1,740/tonne on July 4, as the weak demand environment overshadowed support from the rise in power costs and a brief spell of national strike action in Peru. Short-covering associated in part with news of supply cuts (rumoured smelter output in China and concentrate in Australia) has however boosted prices in mid July to $2,024/tonne (July 11). However, by July 16, prices were back under $1,800/tonne.

Another bearish factor has been the continued accumulation of LME stocks, currently up above 153,000 tonnes. This and the lacklustre state of US demand, has put US premiums under pressure, falling to 3-3.5c/lb. As we head towards the traditional summer slowdown period of July-August, demand for zinc may decline further especially from the mature economies.

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