* Vedanta declines to join Glencore in trimming zinc output
* Chinese miners seen expanding to cover any shortfalls
* Concentrate stocks still ample after cuts -analyst
By Eric Onstad
LONDON, Nov 3 (Reuters) - Prices of zinc and lead have given
up nearly all their gains since Glencore shocked the market with
output cuts, as investors realised other producers were happy to
fill the supply gap.
That means the market is unlikely to see shortages of zinc
and the price rally next year that many bulls had hoped for.
The latest set-back in zinc prices follows disappointment
this year as the well-flagged closures of big mines that had run
out of ore failed to create shortages as expected amid large
inventories.
The benchmark zinc price CMZN3 on the London Metal
Exchange (LME) surged 13 percent over two days in the aftermath
of Glencore's GLEN.L announcements on slashing output.
Commodity trader and producer Glencore, the world's largest
miner of zinc ore, said on Oct. 9 it would cut 500,000 tonnes of
its zinc production or 4 percent of global supply to help
support prices.
Some investors hoped other producers would follow suit, but
a few days after Glencore's statement, Indian rival Vedanta
Resources VED.L said it had no plans to trim its zinc output
since its mines had low costs.
In September, Vedanta said it planned to produce 1 million
tonnes of refined zinc and lead in the current 2015/16 fiscal
year to the end of March, up 15 percent from 869,069 tonnes in
the previous year.
"Investors soured so quickly on the Glencore zinc
announcement," said analyst Edward Meir at broker INTL FCStone.
"It was ... feared that other producers could now step in to
fill the Glencore void."
Glencore also made clear its cuts were temporary, so the
threat of cranking up those mines also hanged over the market,
Meir added.
CHINESE MINES TO FILL GAPS
While some other Western miners have expanded at existing
properties, China is expected to play a key role in plugging
gaps left by any mine closures, said Alistair Ramsay, research
manager at Metal Bulletin Research.
"For every shortfall there might be in the rest of the
world, China will find the supply," he told a recent seminar.
"We don't really see a deficit re-emerging anytime soon."
Citi analyst David Wilson said Chinese producers would
likely boost output if prices recovered. "Twelve Chinese
projects that were postponed this year could easily be
reactivated," he said in a note.
The zinc market is expected to have a surplus of 30,500
tonnes in 2016, according to the average forecast of 10 analysts
polled by Reuters before the Glencore announcement.
A key signal to watch would be the concentrate market, said
analyst Nicholas Snowdon at Standard Chartered (L:STAN) in London.
"From a fundamental perspective, until there are very clear
tightening signals underway, there's no real reason to get
excited about the upside potential."
Global stocks of concentrate - partially processed ore -
were still ample and even after the Glencore cuts, they would
still be over 2 million tonnes by the end of 2016, he added.
(Editing by David Evans)