CANCUN, Mexico Some
producers, die casters, galvanizers and traders who gathered at
the International Zinc Association conference in Cancun this
week remain hopeful of an uptick in special-high-grade zinc
premiums for SHG zinc are between 7.5 and 8.5 cents per pounds.
But in Cancun, traders and producers insisted that the low of
7.5 cents will soon be a thing of the past, as queues at London
Metal Exchange-listed warehouses continue to cause a perceived
tightness in U.S. zinc supply.
"Id say 8 cents is the low
end of the range. It can go up to 8.5 depending on where the
customer is, if its a higher freight and if theyre
looking for bigger tonnages," one trader told AMM.
"The supply-side tightness is driving it."
LME-listed warehouses held 1.2
million tonnes of zinc globally Feb. 28. Warehouses in New
Orleanswith the largest zinc holdings in the United
Statesheld 762,575 tonnes, with queues for delivery
extending out to next summer.
Macquarie Capital Securities
Ltd. analyst Duncan Hobbs said all evidence points to zinc
premiums reaching record highs in the next few months, which he
estimated will head toward 10 percent of the overall price in
some locations (
amm.com, Feb. 27). At current prices, that
represents a premium above $200 per tonne (9 cents per
Three-month zinc ended the
LMEs official session at $2,080.50 per tonne Feb. 28,
down 1.4 percent from $2,109 per tonne one week earlier.
The warehouses have become a
market of first resort rather than last resort for producers,
leaving very little material for consumers, Hobbs told
While the warehousing trends, in
theory, should push premiums up, consumers said demand is still
too weak to justify an increase and maintain that they can
still purchase zinc at a premium of 7.5 cents per pound.
"Theyre just trying to
talk it up. I have no problem getting 7.5 (cents)," one die
caster told AMM.
"Demand isnt there.
Premiums are between 7.5 and 8.5 (cents)," a second trader
The outlook for zinc consumption
is mixed, market sources said. While the automotive market
continues to be robust and the U.S. construction market is
showing signs of life for the first time in four years, sources
said it hasnt translated into much business thus far this
"Demand is OK, but its not
great," one producer said.
Zinc demand growth depends
largely on China, sources agreed.
"Thats what we dont
know. How will China look? Long term, its strong, but
short term, we dont know," a zinc oxide producer
The future of the domestic die
casting industry was also discussed, with one consumer saying
that the zinc and die casting market has been "a dying industry
for years" as jobs are shipped to China.
But this trend is reversing,
Ryan Winter, manager of customer engineered solutions at
Maybrook, N.Y.-based Eastern Alloys Inc., said.
North American die casters are
regaining some market share, he said, citing changes in the
exchange rate between the dollar and the yuan, higher
production costs in China and a recovery in the domestic market
after the 2008-09 financial crisis (
amm.com, Feb. 26).