Network Metals LLC

Sumitomo (TYO:5405) gave word this morning that its San Cristobal mine in Bolivia will likely produce about 246,000 tons of zinc this year, up 41% from last year. This is, as far as we can tell, the first instance in more than a year that a significant zinc producer is visibly upping production to capacity; last year we saw some of the most significant cutbacks in global zinc production in recent memory. It may be tempting to view this as a positive long-term sign for zinc and steel, especially given recent pricing trends. However, increased production is often a response to more economic prices rather than real demand, especially at a site where ramping up is not particularly costly (as we understand is the case with San Cristobal). It is probably too early to say that this is a harbinger of a return of a large portion of idled zinc production capacity.