In the first 10 months of 2007, Chinese zinc exports have risen 21% leading to a 44% decline in zinc prices.
According to the Toronto Star wire services on November 20, the 3-month delivery price for zinc fell by nearly 10% to as low as C$2,270 per tonne on the London Metal Exchange.
Zinc's price is half the record rate of $4,580 on November 10, 2006.
The principal reason for the glut of Chinese zinc exports is a rumour that China's government may rescind a 5% tax rebate on zinc exports. Zinc suppliers from the People's Republic are scurrying to flood global markets with their stockpiled zinc while the 5% tax rebate is still in effect.
We may well be seeing a situation where Chinese exporters are contributing to a 10% decrease in prices that they receive for their zinc shipments - just to lock in a 5% tax rebate.
China is the world's largest supplier of zinc. However, not just Chinese zinc miners are suffering. Canada's Teck Comenico is a leading zinc producer that has seen its class B share price fall by 20% over the past month.
Once Chinese zinc inventories are depleted, the laws of supply and demand should kick in. The global price for zinc should move up, making international trade more profitable for zinc miners like Teck Comenico.
Short-term pain should lead to long-term gain.
