Shanghai zinc premiums under pressure on rising supply

Shanghai zinc premiums have traded lower as an improving arbitrage window has encouraged more outflow from Chinese bonded warehouses, sources told Metal Bulletin.

Zinc premiums stood at an average of $105 per tonne in Shanghai on Friday October 7, compared with $115 the previous week.

Rising outflows from China’s bonded warehouses were helping to lower premiums, market participants said.

“Newly arrived shipments from Australia were offered at premiums of $110 per tonne, while material on warehouse warrants could drop as low as $90,” one trading source said.

“Importers are suffering lower losses on cargoes because of the improving arbitrage. So more material has cleared customs recently,” another source said.

On the other hand, barriers to zinc financing schemes in the light of the Qingdao scandal and China’s surge of exports to Southeast Asian regions have offset some of the downwards pressure on Chinese spot market premiums.

“Traders would not give up this chance if trading credits could have been obtained as easily as previously. At this point, I don’t see outflow to the mainland market on a large scale,” one Shanghai-based analyst said.

“Exports to Taiwan, Singapore and Malaysia diverted some supply from China’s warehouses. But premiums at those locations could be under pressure as well,” she added.

Zinc premiums in Singapore averaged at $123.33 per tonne, while in Gwangyang and Johor they stood at $115 and $111.67, respectively.

editorial@metalbulletinasia.com