March 6, 2018 / 11:17 PM / 8 months ago

Nexa sees strong zinc prices, demand outpacing supply

TORONTO (Reuters) - Brazilian miner Nexa Resources expects demand for zinc to outpace supply, keeping prices for the metal at $3,400 to $3,500 a ton for the rest of the year, Chief Executive Tito Martins said on Tuesday.

Small mines in China, which previously ramped up output to meet demand, are unable to renew permits under new environmental policies and help meet demand growing at a rate of 2 to 2.5 percent annually, Martins said in an interview at the Prospectors and Developers Association of Canada conference in Toronto.

“Prices have been very stable between $3,400 and $3,500 and we are assuming the price should remain, at the least, at the level they are for the full year,” Martins said.

Recent price declines were caused by U.S. President Donald Trump’s plan to introduce tariffs on steel and aluminum imports, he added.

“The perception is that if Trump’s tariffs prevail, all the economies will lose,” he said.

Zinc prices touched their lowest levels since December on Tuesday, sliding to $3,272 a tonne, after an increase in exchange inventories calmed fears about availability.

Zinc prices have been on a tear in the past two years, hitting 10-year highs last month on concerns of supply shortages. But the restart of some mines and a sudden increase in stocks have taken some air out of the rally in the past two weeks.

If Trump levies a 25 percent tariff on steel, that could help Nexa over a six-month to one-year period, he added.

If U.S. domestic steel production increases, zinc, which is used to rust-proof steel, would likely come from nearby Mexico, he said. In turn, that would allow Nexa to sell more of its zinc in Latin America, where it is produced, at lower freight charges and better margins.

The company, currently facing a strike at its Cajamarquilla zinc smelter, expects to resolve the situation in the next 24 to 48 hours, he added. Some 300 unionized workers walked off the job on Monday, but production has not been impacted, he said.

Reporting by Susan Taylor; Additional reporting by Nicole Mordant in Vancouver; Editing by Cynthia Osterman

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