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Zinc alloy premiums fall on declining LME prices

Keywords: Tags  Zinc, special-high-grade zinc, zinc alloys, LME, London Metal Exchange, warehouse stocks, zinc premiums, Suzy Waite

NEW YORK — Declining London Metal Exchange zinc prices have pushed U.S. zinc alloy premiums down, although special-high-grade premiums remain firm.

Three-month LME zinc fell to $1,886 per tonne in the March 27 official session, down 2.8 percent from $1,940.50 the previous day and 14.8 percent below this year’s high of $2,213 per tonne on Feb. 12.

Premiums for die casting alloys Nos. 3 and 7 fell to 17 to 19 cents per pound from 18 to 20 cents previously; No. 5 alloy slipped to 19 to 21 cents per pound from 20 to 22 cents; and No. 2 alloy fell to 22 to 25 cents per pound from 23 to 26 cents.

Premiums for zinc-aluminum foundry alloy No. 12 narrowed to a range of 24 to 25 cents per pound from 24 to 26 cents, and No. 27 alloy fell to 27 to 30 cents per pound from 28 to 31 cents.

Market participants said that automotive demand has stayed pretty robust while housing continues to improve, but demand is not strong enough that premiums can resist the downward pull of LME zinc prices.

Sinking LME prices encouraged some spot special-high-grade zinc buying this week, although volumes remain modest, producers and consumers said.

"There’s been a little more activity since markets are down. Naturally, when the price is down people become more interested. But I’d say ‘picking up’ is the wrong phrase. Things are just better because the price is lower," one zinc consumer source told AMM.

"There are a few truckloads here and there," a trader said.

Special-high-grade zinc premiums remained steady at 7.5 and 8.5 cents per pound. Some market participants said sales were concluded at between 8 and 8.5 cents, but others maintained that getting a spot sale at 7.5 cents was not difficult.

"I would put premiums at a strong 8 to 8.5 cents (but) I’m sure you could still get it at 7.5," a second consumer source said. "It seems like producers ask for more and then threaten that prices are going up, but then you hear of these deals being closed at 7.5. So it’s all hype and speculation to bolster the prices."

Large volumes of zinc remain tied up in financing deals in New Orleans warehouses. LME-listed warehouses in the Louisiana city held 750,725 tonnes of zinc March 28, with queues for metal reportedly out to next summer. And while 19,900 tonnes of zinc entered into New Orleans warehouses and 17,525 tonnes were shipped out between March 8 and 18, sources said the metal is not going to the physical market but simply being shifted off warrant.

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