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- CRB Fundamentals - 2008 Commodity Articles


Zinc (symbol Zn) is a bluish-while metallic element that is the 24th most abundant element in the earth's crust. Zinc is never found in its pure state but rather in zinc oxide, zinc silicate, zinc carbonate, zinc sulfide, and in minerals such as zincite, hemimorphite, smithsonite, franklinite, and sphalerite. Zinc is utilized as a protective coating for other metals, such as iron and steel, in a process known as galvanizing. Zinc is used as an alloy with copper to make brass and also as an alloy with aluminum and magnesium. There are, however, a number of substitutes for zinc in chemicals, electronics, and pigments. For example, with aluminum, steel and plastics can substitute for galvanized sheets. Aluminum alloys can also replace brass. Zinc is used as the negative electrode in dry cell (flashlight) batteries and also in the zinc-mercuric-oxide battery cell, which is the round, flat battery typically used in watches, cameras, and other electronic devices. Zinc is also used in medicine as an antiseptic ointment.

Zinc futures and options are traded on the London Metals Exchange (LME). The LME zinc futures contract calls for the delivery of 25 metric tons of at least 99.995% purity zinc ingots (slabs and plates). The contract trades in terms of U.S. dollars per metric ton. Zinc first started trading on the LME in 1915.

Prices - Zinc prices in 2007 fell 1.4% to a monthly average of 156.17 cents per pound, down slightly from the 2006 record high of 158.44 cents per pound.

Supply - World smelter production of zinc in 2006 rose +1.9% to 10.600 million metric tons, which was a new record high. The world's largest producer of zinc is China with 29% of world smelter production, followed by Canada with 7%, Japan with 6%, and Australia with 5%, and Spain with 5%. U.S. smelter production accounted for only 2.5% of world production in 2006. Australia's production rose rapidly in the 1999-2002 period but the 2006 level of 496,000 metric tons was below the record high of 573,000 metric tons seen in 2002. China's production of 3.1 million metric tons in 2006 was more than five times its production level of 550,000 metric tons seen in 1990. U.S. zinc smelter production in 2006 of 269,000 metric tons was less than half of its production of 796,300 metric tons seen in 1970.

U.S. mine production of recoverable zinc in 2007 rose +6.2% yr/yr to an annualized (through September) level of 740,533 metric tons. U.S. production in 2005 (latest data available) of slab zinc on a primary basis rose by +1.1% to 191,000 metric tons, while secondary production rose +0.9% yr/yr to 118,000 metric tons.

Demand - U.S. consumption of slab zinc in 2006 rose by +9.5% yr/yr to 1.150 million metric tons, up from last year's 15-year low of 1.050 million metric tons. U.S. consumption of all classes of zinc rose by +7.8% yr/yr in 2006 to 1.390 million metric tons, up from last year's 14-year low of 1.290 million metric tons. U.S. consumption of slab zinc by fabricators in 2007 (through September) fell by 28.0% yr/yr to an annualized 287,867 metric tons, which was a new record low.

The breakdown of consumption by industries for 2006 showed that 51% of slab zinc consumption was for galvanizers, 8% for brass products, and the rest for other miscellaneous industries. The consumption breakdown by grades showed that 63% was for special high grade, 15% for prime western, 15% for re-melt and other, and14% for high grade. Within that grade breakdown, prime Western consumption has fallen by nearly half in the past 6 years.

Trade - The U.S. in 2007 relied on imports for 58% of its consumption of zinc, up sharply from the 35% average seen in the 1990s. U.S. imports for consumption of slab zinc rose by +27.4% yr/yr to 851,000 metric tons in 2006, while imports of zinc ore rose by +145.5% yr/yr to 383,000 metric tons. The dollar value of U.S. zinc imports in 2006 rose by +120.5% yr/yr to a record high of $2.642 billion. The breakdown of imports in 2006 shows that most zinc is imported for blocks, pigs and slabs (851,000 metric tons); followed by ores (383,000 metric tons); dross, ashes and fume (31,100 metric tons); dust, powder and flakes (30,100 metric tons); waste and scrap (14,200 metric tons); and sheets, plates and other (2,050 metric tons).

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