LONDON London Metal
Exchange zinc stocks fell for the 13th consecutive day May 1 as
a drawdown continued in New Orleans, Antwerp, Belgium, and
Johor, Malaysia, where there are large queues to take out
The withdrawal of 6,300 tonnes
of zinc from those locations put total LME zinc stocks at 1.06
million tonnes, down 13.5 percent from a year-to-date high in
January and the lowest level since October.
The recent withdrawals have
taken zinc stocks down from the 19-year highs hit late last
year when inventories surged in Antwerp and New Orleans and
rose more modestly elsewhere.
Queues to withdraw metal from
Antwerp, Detroit, Johor and New Orleans, where 90 percent of
LME zinc stocks are stored, have limited the impact of rising
stocks on the practical availability of metal for end users, or
the premiums they pay for it.
The rate at which material is
loaded out from those locations is not sufficient to "satisfy
actual demand requirements from consumers and to guarantee
timely delivery," European steel industry association Eurofer
said in a position paper made public last week.
The association is understood to
have sent a letter to the LME urging the exchange to make
changes to its load-out rules, which require warehouses to
deliver out between 1,500 and 3,000 tonnes per day, depending
on the volume of material stored in any given location, as well
as 500 tonnes per day of any metal that is stuck behind a queue
to withdraw 30,000 tonnes or more of another "dominant" metal
in that location.
The group, which represents
about 40 steelmakers in Europe, said that existing LME load-out
rules "create an artificial shortage for physical consumers,
allowing metal producers to increase premiums for fulfilling
The group wants the LME to
implement new load-out rates that are defined on a
per-warehouse basis rather than a per-company basis.
"The warehouse system is under
constant review and we will communicate our response when it is
appropriate to do so," an LME spokeswoman told AMM
sister publication Metal Bulletin.
The availability of metal in
Europe has eased moderately as material has started to leave
Antwerp sheds, a zinc buyer at a European steel mill told
Metal Bulletin. "There is no shortage of material;
producers and traders have stock and material is leaving LME
warehouses. Its being offered, but still premiums are too
In-warehouse Rotterdam zinc
premiums were $95 to $110 per tonne May 1, up $5 from a month
While LME stocks have fallen,
availability has been crimped in recent weeks by planned
outages at Boliden ABs copper and zinc smelters, which
began in April and are scheduled to continue through the second
The impact has been particularly
acute in the United Kingdom, which is supplied predominantly by
Glencore International Plc and Boliden, a U.K. steel
company source said. "I dont know where the material
thats leaving the LME is, but it hasnt made it over
here, thats for sure."
British SHG zinc price for April was £1,353 ($2,100) per
tonne, down 3.1 percent from £1,396 per tonne in March,
although the average reported premiums rose about £4 to
reach £145.18, while LME zinc prices fell.
A large proportion of
Britains zinc requirements are secured on annual formula
contracts, but quotes for spot material rose $10 over the
course of the month in response to the tighter supply caused by
the Boliden outage, the British steel company source said.
Boliden is expected to update
investors on the impact of the outages on May 3, when it is
scheduled to release its first-quarter results. It expects its
operating earnings to fall by 300 million krona ($44 million)
as a result of the maintenance campaign.
A version of this article was first published in AMM sister
publication Metal Bulletin.