Lead and zinc spot prices rise despite market crash
Fri, Sep 19, 2008
By Heather Matthews - Exclusive to Lead Investing News
Current market climate
Zinc metal and lead metal spot prices are rising despite significant fear and panic in the investing world. Following the bankruptcy of Lehman Brothers World Investment Bank, and the Federal Reserve bailout (85 billion) of AIG, many analysts are predicting that more banks will fail, on a scale not seen since the Great Depression.
The United States banking business is at a crisis point, with almost twelve banks becoming insolvent: these banks are looking at ways to sell and re-open under different ownership, in order to survive in the new economic climate. Rumors are pointing to the imminent sale of Morgan Stanley, one of America’s most prominent and established banks, as the stock market crash takes its toll on financial institutions worldwide.
“People are finally realizing that we are probably in the worst financial crisis since the Depression,” noted Alfred Goldman, an analyst with Wachovia Securities. “We are in a period of excessive fear.”
Current zinc price (spot price, non-LME) is at a bid/ask of .8174 to .8219, an increase of .33 per cent over yesterday’s closing bid (September 18, 2008 figures). Lead metal prices range from .8174 to .8219, for an increase of .73 per cent (non-LME spot prices).
These increases may not be indicative of the general health of the lead and zinc commodities market. Zinc, in particular, has lost a lot of its value over the past months, and many negative developments, such as mine closures, have made its future performance appear bleak to analysts and investors. Here are the latest developments for prominent zinc and lead mining companies, in the face of this huge financial crisis:
OZ Minerals - OZ Minerals is an Australian conglomerate devoted to the output of many base metals, and it is one of the world’s largest zinc producers. Today, company representatives announced plans to cut production at one of their largest zinc mines by up to 40 per cent, due to the low spot prices and demand for zinc in the world market. Oz Minerals has a strategy in place to deal with the current lack of demand for zinc: it will step up its production of copper instead, which is a strong global performer in the commodities market.
Teck Cominco - Teck Cominco recently closed zinc mines in the Leonard Shelf development, due to poor profits and low demand. Despite these closures, the company’s shares are currently trading at 33.24/per share on the NYSE (TCK), with stock rising 4.30 per cent from a previous closing bid/ask price of 31.87 (September 18, 2008). Currently, Teck Cominco is involved in a bid for the Fording Canadian Coal Trust, which will require almost ten billion dollars in borrowed funds. Some market experts have expressed concern about Teck Cominco moving forward with this deal under the current market conditions, but the company is still committed to the project. Petro-Canada is currently partnering with Teck Cominco in an oil sands development, with Petro-Canada owning the majority of 60 percent of the project. This project budget has swollen during Phase 1 as inflation has risen drastically over the past two years.
Xstrata - This company is a highly diversified multinational mining concern, involved in operations in many countries all over the world, including Canada. Xstrata has been nominated as the leader for the resource sector, in the Dow Jones Sustainablility Index, for the second year running. At present, Xstrata employs 56,000 workers worldwide, and their head offices are in Switzerland. On the London Stock Exchange, Xstrata is trading at GBx 1965,00/per share, with an increase of 2.02 per cent over yesterday’s closing ask/bids (September 18, 2008).
Lead and zinc are holding their own, but copper is starting to drop. For details, check Copper Investing News.
Tags: AIG, base metals, Canada, closure, commodities, copper, crisis point, demand, futures, great depression, investors, lead, lead metal, lead mining, metals, mineralization, mines, mining, oil, resources, stock market crash, wachovia securities, world investment, xstrata, zinc, zinc metal, zinc mines, zinc price
September 23rd, 2008 at 4:52 am
This is an interesting article considering the long term demand for base metals from the BRIC economies, particularly China.
I looked at the data from the World Bureau for Metal Statistics and it seems that only for the massive demand from China that prices would now be lower.
Interesting to note that Rio Tinto, in a recent seminar entitled “Value and Growth” pointed to strong demand for their main three products, copper, aluminium and iron ore, over the next decade and beyond, due to urbanisation in China.
The report said that rates of urbanisation were likely to be higher than overall GDP growth in China.
You say that zinc mines are closing. Well, I would imagine that say 12 months fom now,there will be a shortage as inventories are run down, and then there will be a price surge in the metal.