China's refined zinc consumption is set to rise for the rest of 2013, buoyed by the central government's plan to boost rail investment as well as seasonal demand, keeping zinc imports at strong levels.
To date, domestic spot zinc prices in China have been stuck well below the highs of 2010 and 2011 but there is potential for this to change.
However, they also remain above international levels as some large smelters have cut sales to prop up the market, prompting strong levels of imports for financing deals.
Pro-growth policies outlined in recent weeks to support the economy, including infrastructure projects and rail investment, have helped support metals, with steel prices up 25 percent since late May.
The government would step up rail investment and aims to exceed its 2013 investment plan, the central government confirmed this week the increased investment.
If the target is achieved, rail investment would rise to 343 billion yuan (US$56 billion) in the second half of the year, from 187 billion yuan in the first half, Nomura said in a report Monday.
Zinc companies set to benefit
Australian zinc project developer Ironbark Zinc (ASX:IBG) looks set to be a beneificiary as it is the 100% owner of the world class Citronen zinc and base metal project that is located in Northern Greenland.
With a resource of 71 million tonnes at 5.7% of zinc, (Zn) and lead (Pb), containing 13 billion pounds of zinc and lead, Citronen is one of the world’s largest undeveloped zinc resources.
The massive project has attracted major investors that include GlencoreXstrata, which is the world’s largest zinc miner and trader and Nyrstar which is the world’s largest zinc and lead smelter group.
China Nonferrous, which is ranked as one of the world’s top engineering firms, has executed a Memorandum of Understanding to build and majority fund the process plant.
Ironbark Zinc is focussed on completion of EPC with China Nonferrous this year and construction by 2015, and commissioning of concentrate production by 2016.
This timetable should catch the recovery in the zinc price wave nicely and at current market cap. of around $20 - $22 million and a share price of just $0.06, appears heavily undervalued relative to resource and its peers.
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