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 metal.
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 actual consumption."
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 high."
In-warehouse Rotterdam zinc premiums were $95 to $110 per tonne May 1, up $5 from a month earlier.
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 quarter.
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."
Metal Bulletins 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.