Reuters quoted some analysts as saying that improving demand may send zinc prices sharply higher in coming months but vast stockpiles built up in China will eventually find their way West and send prices spiraling lower late 2010.
Others see modest price gains compared with other metals such as copper and lead.
Mr Graham Deller of industry consultants CRU Group said that "London Metal Exchange stocks may drift up but most of the market surplus has been generated in China and is not that visible."
Ms Gayle Berry an analyst at Barclays Capital said that zinc had some upside price potential helped by the brighter demand outlook. She pointed out that a fair amount of idled production had been restarted which could act as a cap on price rises.
Mr Deller estimated that around Q3 of a million tonnes of inventories were being held in China some 400,000 tonnes to 500,000 tonnes above normal levels. That much of the material was tied up as collateral against bank loans. But once the uptrend in zinc prices was reversed, holders of that material could be forced to liquidate quickly. That could lead to panic selling and a lot of metal being exported to the West.
He said that the size of the global market surplus would become more apparent and push prices down to sensible levels of USD 1,200 per tonne to USD 1,300 per tonne in the next 12 to 15 months. But he did not rule out prices as high as USD 2,500 to USD 3,000 before that.
At USD 1258 GMT the LME 3 months zinc price was indicated at USD 2,002/12 per tonne having earlier reached USD 2,015, its highest since July 2008.
Below are some of the more significant recent developments in production, stocks and prices that may influence the direction of the market in 2009.
August 30 - Workers from the closed Doe Run Peru smelter said that they were postponing roadblocks and protests planned for August 31st 2009 to pressure the government to reopen the financially troubled metals plant. Doe Run Peru stopped production at its La Oroya polymetallic smelter in June when it ran out of money as banks cut off credit.
August 28 - Bulgaria's KCM said that it will boost its lead and zinc output this year as the market situation improves. The plant plans to raise zinc and lead output by 2,000 tonnes to 3,000 tonnes to 65,000 tonnes and 64,000 tonnes respectively.
August 25 - Doe Run Peru said that it may cancel a filing it made to request protection from creditors if its deadline to finish an environmental clean up program is extended and it reaches a deal with creditors.
August 19 - The global zinc market was in surplus by 273,000 tonnes in the H1 of 2009, latest figures from the International Lead and Zinc showed. Global refined zinc use was 5.079 million tonnes down from 5.737 million a year earlier. World refined zinc output was 5.352 million tonnes down from 5.858 million a year earlier.
August 11 - Figures from the National Bureau of Statistics showed that China produced 2,274,800 tonnes of refined zinc in the January to July 2009 up 0.9% from a year earlier. Mined zinc output fell by 12.8% over the same period to 1,512,900 tonnes.
August 7 - An analyst at state owned research group Antaike said that China's refined zinc production may reach an all time record in the Q3 following the start up of 300,000 tonnes per year of new capacity and greater use of existing capacity due to high prices.
August 3 - Union workers and company officials at the Antamina zinc copper mine in Peru plan to meet this week to hash out a new labor agreement after their previous one expired in late July.
Zinc prices adopted a firmer tone in August, ending the month at USD 1,864 per tonne from USD 1,750 at the end of July.
On August 13th 2009, 3 months prices rose to USD 1,948 per tonne their highest in more than a year. The rally across the metals complex was triggered by growth optimism after the Federal Reserve said that the US economy was showing signs of leveling out.
Concerns about slowing Chinese demand weighed on prices towards the end of the month though and any forays above USD 1,900 proved short lived. But in early September prices established themselves above that psychological level, boosted by worries that the recent closures of lead smelters on poisoning worries might spread to zinc plants.
