Zinc to drop 11% in 2008: Study

Output of zinc will rise 7.8 per cent next year on growth in China, India

Zinc, the worst-performer on the London Metal Exchange this year, will drop 11 per cent in 2008 as the market returns to surplus, National Australia Bank has said.

Output of zinc will rise 7.8 per cent next year on growth in China, India and Europe, sending prices lower, Gerard Burg, minerals and energy economist at Melbourne-based National Australia Bank, said today in a report. The price will average $2,925 a tonne, down 11 per cent on the bank's 2007 forecast.

Zinc, used to galvanise steel, has dropped 41 per cent this year as new mines boost supplies. Citigroup this month cut its 2008 forecast for the metal by 28 per cent.

"In 2008, zinc markets are forecast to return to surplus "" as production outpaces relatively modest demand growth," Burg said. "Reflecting this outlook, zinc prices are expected to ease in 2008."

There will be a surplus of some 250,000 tons next year, equivalent to a week of global zinc consumption, Burg said. This compares with a balanced market in the first seven months of 2007, he said.

Zinc for three-month delivery in London rose $105, or 4.4 per cent, to $2,490 a tonne yesterday. The metal has dropped by almost half from the all-time closing high of $4,515 a tonne on November 9, 2006.