Teck Cominco Should Benefit from China's Strong Demand for Zinc

China's latest metals trade data remains positive for Teck Cominco Ltd. (TCK) and other western world producers of zinc and copper, says Desjardins analyst John Hughes, reiterating his "buy" recommendation and C$62.10 price target for Teck shares.

On Monday, the Chinese government said that the country imported net refined zinc of 9,753 tonnes in June versus net imports of 13,592 tonnes in May and an average monthly rate of 3,583 tonnes in the first five months of the year. Total net imports from January to June 2008 were 27,671 tonnes or 55,342 tonnes annualized, which compares favorably to Mr. Hughes net export forecast of 50,000 tonnes for 2008. 

In a note to clients, Mr. Hughes said:

The Chinese metal data for June indicate continued strong demand for zinc in China, a key feature that should ultimately provide support for higher zinc prices. Overall, we expect zinc prices to average $1.05 per pound in 2008 and $1.25 per pound in 2009.

China also reported slowing data for refined copper with net imports at 62,937 tonnes during the month. For the year so far, net imports equal 625,497 tonnes for a annualized rate of 1,251 KMT versus the analyst's estimate of 1,200 KMT.

The analyst wrote:

We believe the 'weaker' imports reflect a seasonal summer slowdown, as well as Olympic-related cutbacks in industrial production.

He added net copper imports should recover to the 100 plus KMT level in the latter part of 2008.

He forecasts copper prices of $3.50 per pound for 2008 and U$4 per pound for 2009.