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Zinc premiums jump in New Orleans

Keywords: Tags  zinc, premiums, New Orleans, warehouses, warehousing, special-high-grade zinc, SHG, London Metal Exchange warehouses LME warehouses

NEW YORK — Offers for special-high-grade (SHG) zinc in New Orleans have risen considerably in recent weeks, according to market participants.

Traders with metal on the ground in New Orleans are now offering premiums for SHG of between 6 and 7 cents per pound basis f.o.t., sources said.

"If someone comes to me looking for metal, I’m offering 7 cents (per pound)," one trader told AMM.

The increase comes as zinc inventories in London Metal Exchange-approved warehouses in New Orleans continue to be tied up in lengthy queues and after Baar, Switzerland-based Glencore Xstrata Plc apparently signaled to its customers that it would have no spot availability from its Portovesme smelter in Italy until June at the earliest, the trader said.

"Six to 7 cents is the going rate," a second trader said. "That’s why delivered customer Midwest is at 9 (cents, or maybe higher)."

AMM’s delivered premiums rose to between 8 and 9 cents per pound May 10, up from 7.5 to 8.5 cents per pound previously, with unconfirmed reports of higher numbers in the market.

Market participants said that the rise came as producers boosted their tags and as supply from LME-approved warehouses remained constrained.

"We raised our prices recently," one producer source said.

One zinc alloy maker told AMM that he was offered material from a warehouse location at 9.5 cents but that he did not buy any.

There is no material available in LME-listed warehouses in New Orleans for prompt delivery, according to traders.

"You can pay a $10 premium for warrants in LME warehouses, but you will also have to wait about 10 months for it," the second trader said.

Market participants holding zinc outside of these warehouses—and therefore not stuck in the queue to deliver material out—can command a much higher premium now than that supply in the market appears, participants said.

SHG stocks in LME-listed warehouses in New Orleans stood at 663,175 tonnes May 22, 437,350 tonnes of which are canceled, according to data from the exchange. This compares with stocks of 797,350 tonnes May 2.

While stocks in LME-listed warehouses have declined thanks to the exchange’s 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, market sources noted that such material is often moved to another warehouse rather than to consumers.

"There’s a small amount of movement out of the (LME-listed) warehouses, but it’s just going into other warehouses," the second trader said.

Meanwhile, inventories of SHG zinc have all been removed from LME-listed warehouses in Chicago, which started the year with 2,350 tonnes in stock.

As a result of the higher offers for SHG, AMM’s daily in-warehouse premium for New Orleans has increased to a range of $90 to $110 per tonne from zero to $35 per tonne previously.

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