Nyrstar sees higher zinc prices next year

The world's biggest zinc producer sees rising steel prices in 2010 and as a result continued strength in demand for its product

Posted: Thursday , 17 Dec 2009

BRUSSELS (Reuters) -

Belgium's Nyrstar (NYR.BR), the world's biggest producer of zinc, is confident steel prices will rise in 2010, as demand for galvanized steel picks up, particularly in emerging countries, its chief executive said.

The looming threat of a shortage of mining capacity from 2011, 2012 would also help zinc prices, Roland Junck said in an interview published in Trends magazine.

"Recently very little has been invested in zinc mines, and some big mines are nearing the end of their lives. Such a situation causes a rise in zinc prices," Junck said.

Zinc futures MZN3 are trading at around $2,400 per tonne, against about $1,500 in mid-July and about $1,100 a year ago.

Nyrstar said in June it would expand into mining to complement its smelting operations, and has since then bought mines in the United States and a stake in a mine in Peru.

"By the end of 2010, start of 2011, we will be at full capacity. But is that the limit? There is a big chance that, in Peru for example, we can double the capacity," Junck said.

Earlier this year, the group announced production cuts and restructuring plans due to falling demand in the economic downturn.

"We survived the first half of the year so we will also get through the second part without damage. The situation is improving gradually," he said.

Asked whether the group would make a profit in 2009, Junck said he was optimistic about the zinc price, but added the group's gross profit was also influenced by factors not linked to zinc prices.

"The premiums we receive for high-grade zinc products for example, reflect economic reality. And they will therefore remain low, in 2010 as well," he was quoted as saying.

Nyrstar recorded a net loss of 595 million euros ($857.1 million) in 2008. (Reporting by Antonia van de Velde; editing by Sue Thomas)