[B]04.09.2007
Use of cheaper zinc substitutes to shave metal's price in 2008 - analyst
LONDON (Thomson Financial) - Increased usage of zinc substitutes will push prices lower next year, while forecasts for higher supply is also likely to put downward pressure on the metal's value, said a leading analyst.
Zinc prices are predicted to
average 3,400 usd per tonne in 2007 before falling to below 3,000 usd in the longer term because consumers choosing lower priced substitutes will dampen demand, according to Claire Hassall, principal at CHR Metals. Production is also likely to catch up with Chinese and Indian demand, she added.
Prices hit a year-low of 2,911 usd earlier today.
Speaking at the Mining Journal's 20:20 Investor Series, Zinc Day, this afternoon she said: 'I think very possibly the zinc price is going to come off from here
'Many people believed zinc could stay above 3,000 usd, but this morning has proven us wrong.'
Hassall added that
although zinc was likely to rise above 3,000 usd again in the short-term, prices will most probably fall next year as consumers continue to source cheaper substitutes.
Robust Chinese and Indian demand has fuelled zinc prices in recent years which surprised many miners and squeezed supply.
However, with higher prices, many operators invested more into zinc mining which has
improved the supply outlook .
'A shortfall in raw material supplies supported prices in 2005 and 2006,' Hassal said. 'Higher prices have kick-started a lot of projects, and a lot of mines have come back into operation.'
Zinc is currently trading on the LME at around 2,940 usd.
The metal hit a year high of nearly 4,200 usd in May.
d.sheppard@thomson.com