News

February 04, 2009

How To Time The Next Market Upswing: ZincOx Ponders Its Next Move

By Alastair Ford

There are more than a few market commentators out there talking about how companies should position themselves for what’s termed “the next upswing”. Zincox, you could argue, is one company that might turn out to be extremely well positioned. And when this thesis is put to him, Andrew Woollett, the executive chairman of Zincox, doesn’t disagree with it. Not in so many words. But he does counsel a certain amount of caution. He must, he says, remember to temper his “natural optimism”. Because it's not too hard, on a combination of sound economic analysis and wishful thinking, to make a case that the zinc price is likely to be higher this time next year. Hovering as it is at around US$1,000 per tonne, zinc is now trading down at levels not seen consistently since 2003. On the other hand, before we run away with the idea that what goes down must come up, it's worth noting that for the five years prior to 2003 zinc rarely traded much above that US$1,000 per tonne mark either. So, in short: you could either say that given that zinc peaked at well over US$4,000 back in the Indian summer of 2006, and that the average price over the last ten years is therefore well above US$1,000, now as good a time as any to dive in. Or you could say that on recent form, when the zinc price tanks, it stays tanked for years at a time.

On the optimistic side, it looks as though the iron ore markets are picking up slightly. Chinese buying has pushed freight rates up, as well as iron ore spot prices. This bodes well, as iron ore goes into steel, which is also a big user of zinc. On the negative side, all the commentary says that this is the worst global economic environment the world has witnessed since the great depression of the 1930s. And it took a world war, the complete economic and physical destruction of Germany and two...