Zinc premiums set to rise: Macquarie
Feb 27, 2013 | 12:21 PM
| Andrea Hotter
CANCUN, Mexico Zinc premiums look set to reach record levels in the next few months and could result in increased downside risk to London Metal Exchange tags, according to Macquarie Capital Securities Ltd. analyst Duncan Hobbs.
"Well see zinc premiums head towards 10 percent as a percentage of overall price in some locations," he said. "Rising premiums impact the breakeven price-cost calculations and may increase downside risk to exchange prices in a declining market since smelters can afford lower prices, if offset by higher premiums before cutting output."
The historic price-to-stock relationship has broken down and might not be restored for some time, Hobbs said.
"Zinc premiums and LME prices tend to trade together. But more recently the exchange price is flatter while premiums have continued to rise, creating a disconnect," he said.....
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