Driven by high prices in 2006/7, many miners poured money into new mines or expanded existing ones. Prices rocketed as the world market moved into deficit, but galvanized and alloying demand slackened just as new mines came on stream. As a result, the market went into over supply last year and prices have come steadily down in response. CBH Resources has recently spent $85m developing their Endeavour lode in eastern Australia, boosting production from 1.05m tons this year to 1.3m tons next year whilst at the same time reducing man power by 33%. The net result will be a much lower cost per ton of product and the ability to ride out the down turn in the market. Brave but prudent, one may say if prices stay permanently low, but the belief by some in the market is prices will rise again in the medium term. BMO Capital Markets predicts the prices will bottom at around $.85/lb through 2009 even as production rises at 9% this year and 7% in 2009. They say that prices will be supported by high Capex and energy costs. That may indeed limit the ability of some producers to follow the market down but the reality is there are high and low cost producers — so in a period of over supply as we will have for the next few years, the price will be set by the low cost producers who can still supply as prices decline. Unless there is a dramatic pick up in the galvanized steel market, we can’t see Zinc prices bouncing back anytime soon. Indeed, the next move may be further down.