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Sinking LME keeps floor under zinc premiums

Keywords: Tags  zinc, zinc premiums, SHG zinc, special-high-grade zinc, LME, London Metal Exchange, zinc prices, HudBay Minerals Suzy Waite

NEW YORK — Special-high-grade (SHG) zinc premiums are holding firm and could be poised to inch higher as sinking prices on the London Metal Exchange encourage some would-be buyers to come in off the sidelines, sources said.

Three-month zinc closed the official session on the LME at $1,889.50 per tonne April 11, up slightly from the previous week but still down nearly 15 percent from this year’s high of $2,214 per tonne recorded Feb. 13.

That drop has encouraged a little interest, with some opportunistic buyers looking to book out into 2014, one consumer source said.

"There have been some people wanting to come in and buy for next year," the consumer said. "I think people look at the zinc price and everyone is wondering how much lower it will go before it springs back."

A trader confirmed he has seen a slight bump in activity, although he maintained zinc demand is still nothing to write home about.

"We haven’t seen a huge uptick in demand," the trader said. "(But) there are a few people calling; there’s a little bit of an uptick."

AMM’s SHG zinc premiums held steady this week at between 7.5 to 8.5 cents per pound. "We haven’t bought much SHG over the past couple of months. We did the majority of our buying in December. But I’d peg premiums at a solid 8 (cents)," a second consumer said.

But sources said they there were indications those numbers could rise.

"I was able to buy cheaper, but I do find there are higher numbers out there," the consumer said, citing purchases this week at 7.5 cents and noting that demand is stronger in some sectors than others. "Demand is not bad. It goes back to whatever my customer is making. If they’re in automotive, it’s good at the moment. If they’re in industrial, that isn’t so good."

Meanwhile, earlier issues reportedly impacting some SHG zinc output from HudBay Minerals Inc. have since been resolved, multiple sources told AMM.

A company spokesman declined to comment, but a number of consumer and trader sources said Toronto-based HudBay had experienced some minor off-grade production issues in March.

"HudBay had a little hiccup, but it’s been cleared," the first consumer said, adding that customers’ ability to get material was not affected.

"They’re back and producing," a trader confirmed.

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