Strike Threat Lifts Zinc and Lead Prices to Records COMMODITIES MARKETPLACE By Bloomberg
Posted on: Wednesday, 18 January 2006, 12:00 CST
By Chanyaporn Chanjaroen
Zinc and lead rose to record levels Tuesday on speculation that workers would strike next week at a large mining company in Peru.
Employees at the company, Volcan, have threatened to stop work beginning Jan. 24 to protest longer working hours.
"The issue in zinc is the lack of concentrate, and Volcan produces concentrate," an intermediate product that's refined into metal, said Stephen Briggs, a analyst at Societe Generale.
On the London Metal Exchange, zinc for delivery in three months rose as much as $12.50 to $2,092 a metric ton, a record. In 5 p.m. trading, zinc was up $5.50 at $2,085. Lead for delivery in three months was up $17 at $1,253 a ton, also a record.
Peru is one of the world's largest zinc producers. An eight-day strike by Volcan miners last year ended after the company agreed to pay them a bonus. Volcan produced 235,254 tons of zinc and 60,731 tons of lead in 2004.
"Everyone is bullish about zinc because of the prospect that it will become tighter and tighter over the next 18 years," Briggs said.
Demand for zinc, mostly used as a corrosion-resistant coating for steel, is expected to exceed supply by 532,000 tons this year, forcing manufacturers to dig deeper into inventories, RBC Capital Markets in Canada said in a report last month. Supply will lag behind demand through 2007, Briggs said.
Lead gains are also related to a strike threat at Volcan, Briggs said.
"The market sentiment is so bullish on everything, and speculators have got control," he said. Investors are being attracted to commodities after prices outpaced securities like stocks and bonds in 2005. Copper fell on speculation that more of the metal had arrived in Shanghai, increasing supply.
In 5 p.m. trading in London, copper for delivery in three months fell $8 to $4,580 a ton. Copper rose as high as $4,615 earlier Tuesday
Gold fell on expectations that recent gains were overdone. Gold futures for February delivery were down $2.70 at $554.30 an ounce on the New York Mercantile Exchange. Chanyaporn Chanjaroen
Source: International Herald Tribune
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