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US zinc premiums fall on stalling demand

Keywords: Tags  zinc, zinc premiums, No. 3 diecasting alloy, special-high-grade zinc, Chris Prentice, LME

NEW YORK — Delivered premiums for special-high-grade zinc and zinc alloys have fallen in recent weeks as lower terminal market prices and stagnant demand put downward pressure on spot material.

"The LME (London Metal Exchange) has come down, and sales continue to be sluggish," one domestic alloy producer told AMM. "It’s still a rough U.S. economy. Zinc has a huge place in the home and housing industry, (and) new housing remains depressed."

Delivered premiums on special-high-grade material fell to 7 to 8 cents from 7 to 8.5 cents per pound previously.

Amid what market players described as "steady" and "quiet" demand, falling zinc prices and the ready availability of the material have pushed premiums lower. "Any increases (in orders) we’ve had as of late, we’ve been accommodated," one zinc buyer said.

"There’s more pressure on premiums" because the material is readily available, a second alloy maker agreed.

One zinc producer cited spot special-high-grade zinc premiums of 7 to 9 cents, with the bulk of business at 7 cents but reaching as high as 9 cents per pound depending on location and quantity.

Premiums on die-cast and foundry alloys fell almost across the board due to weak demand, alloy producers told AMM. The delivered premium on No. 3 alloy fell to 16 to 18 cents per pound from 17 to 19 cents previously. That brought alloy prices to $1.0609 to $1.0809 per pound Wednesday.

"Business is slow," the first alloy producer said.

"It’s been consistently quiet," the second alloy producer agreed. "It really hasn’t been bad by any stretch, but obviously, demand isn’t robust." He said he has had to take prices down 1 to 2 cents below list prices in order to book business.

Demand "seems to have stalled a little bit," a third alloy producer said.

Meanwhile, the drop in exchange prices has drawn attention from buyers looking for availability in 2013, some market players said.

"With the lower prices, there’s some interest for next year," one trader said. "Nobody wants to be wrong and sell low." So far, that business has been quoted, but not actually transacted.

The zinc producer said he had also received inquiries for material for 2013, adding that he was quoting at the higher end of his current spot range of 7 to 9 cents per pound for 2013 contract material.

"For premiums, where you are right now, why would you sell at today’s floor?" the producer said.

Three-month zinc settled at $1,986 per tonne (90.1 cents per pound) in official trading on the LME Wednesday, down 9.5 percent from a $2,195.50 per tonne (99.6 cent per pound) on Jan. 27, the highest close thus far this year.

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