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Some commodity traders have ramped up withdrawals of zinc from London Metal Exchange warehouses in recent months. However, the drawdowns may not be to fulfill customers’ spot demand, which is almost non-existent, multiple sources and traders told Fastmarkets. Zinc stocks in LME warehouses in Asia have dwindled to as little as 41,950 tonnes as of Monday September 29. This is the lowest level since April 2023.
But most of the drawdowns are not demand-driven, according to sources.
The lowest level that LME zinc stocks have ever fallen to was 15,600 tonnes in February 2023. During this time, prices hit record highs of $3,240 per tonne. LME zinc stocks stood at 253,250 tonnes on September 27 last year.
A major commodity trading house is among those withdrawing huge volumes of zinc from LME-registered warehouses in Singapore. Yet, sources said the metal is being swapped between warehouses because very few customers are asking for stocks at present.
The withdrawals could also be for speculative purposes. The aim is to buoy the LME zinc price to a certain level following a lackluster start this year, according to the sources. These views were echoed by various analysts spoken to by Fastmarkets.
The LME zinc price has hovered around $2,900 per tonne in recent weeks. This follows it reaching about $3,000 per tonne on September 16.
According to Fastmarkets analyst James Moore, about 335,772 tonnes of zinc has been withdrawn from the bourse’s warehouses so far this year. This compares with 238,850 tonnes in the corresponding period last year.
The stocks are being pulled out at a time when spot demand for the metal in Europe, Asia, and the US remains sluggish.
“It appears a good proportion of the metal [about 335,000 tonnes] withdrawn from warehouses so far appears unaccounted for, which in our view is tied into some form of warehouse or financial activity,” Moore said.
Since July, about 92,850 tonnes of zinc have left the exchange’s warehouses, Moore said.
Numerous traders told Fastmarkets that there has been no sudden upsurge in demand to warrant the massive stock drawdowns from the warehouse system.
“There is nothing we see in current data to suggest that the market is short of zinc and the need to draw down,” one trader in Europe told Fastmarkets.
Still, the actual tonnage available on the LME system is 30,625 tonnes as of September 29. This is after 11,325 tonnes of canceled warrants.
European zinc premiums were flat during the pricing period to Tuesday September 23. This was amid persistently weak demand, with some traders telling Fastmarkets they are struggling to attract buyers at current premiums.
Fastmarkets’ weekly assessment of the zinc SHG min 99.995% ingot premium, dp fca Rotterdam and the zinc SHG min 99.995% ingot premium, dp fca Antwerp were both stable week on week at $250-270 per tonne on Tuesday.
“The destocking may not be driven by physical demand,” a Shanghai-based trader told Fastmarkets. “I would say this is more ‘warehouses games’ instead.”
Spot trading in the Southeast Asian market is slow. Most of the metal’s purchases are for long-term contracts, according to sources.
Demand is sluggish and for some traders, Southeast Asian zinc spot trading is not worth paying close attention to currently, a source in Singapore said.
“I have not seen any significant increase in demand in Southeast Asia; everything is just business as usual,” another source in Singapore said.
Fastmarkets most recently assessed both the zinc SHG 99.995% ingot premium, fca Singapore and the zinc SHG 99.995% ingot premium, fca Malaysia at $100-115 per tonne on September 16, both unchanged since May 13.
Meanwhile, Fastmarkets’ assessment of the zinc SHG min 99.995% ingot premium, cif Southeast Asia ticked up by $5 to $125-150 per tonne during the fortnightly pricing period to September 16. This increased from $120-145 per tonne on September 2. The premium had been stable at $120-145 per tonne since April 15.
“There is nothing in the way [zinc] spot premiums are behaving to suggest that there has been any sudden tightening,” the Europe-based trader said. “We can only speculate that these stocks are being pulled out for some other reasons.”
Consumption for zinc in Germany, the biggest economy in Europe, slumped to 336,300 tonnes in 2024. This compares with 476,584 tonnes a decade earlier, according to data compiled by a European trader.
Germany has consumed 186,300 tonnes of zinc so far this year, according to the data.
Germany’s zinc demand has been partly weighed down by steel production, which was down by 12% year on year in July, Fastmarkets’ Moore said.
“Zinc typically goes through sporadic periods of tightness that is often less to do with the fundamentals such as demand of zinc globally. It is more to do with the positioning of traders and stock levels on the LME,” Perfectly Hedged CEO Samuel Basi said.
Meanwhile, zinc stocks on the Shanghai Futures Exchange swelled to 100,544 tonnes as of September 26, after deliveries were boosted over the past two months. SHFE stocks stood at 45,364 tonnes on July 4.
Just like in Europe, stockpiles have burgeoned in China due to a seasonal pullback in demand during the summer. This is not showing signs of recovering, sources said.
China’s ample supplies have resulted in traders eyeing the export market.
Traders are eyeing the opportunity to export refined zinc if an export arbitrage loss, which arises from the SHFE and LME zinc price differentials, continues to narrow. This follows the recent rally in the LME zinc price, a number of sources said.
China’s zinc export window could open if that gap, currently calculated by traders at about 100-200 yuan ($14-28) per tonne, is closed, a Shanghai-based source said.
Fastmarkets’ zinc and lead price data combines the intelligence of some of the industry’s leading brands such as Metal Bulletin, American Metal Market (AMM), Scrap Price Bulletin and Industrial Minerals. Find out more about our zinc prices here.