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Zinc consumers brace for higher '14 premiums

Keywords: Tags  Zinc, premiums, special high grade, alloy, 2014

NEW YORK — Zinc premiums have held over the past two weeks but alloy alloy makers are bracing for potentially higher special-high-grade contract premiums for 2014.

"That’s sort of where I’m starting to look to try and have zinc locked in into 2014," one alloyer said. "But based on the numbers I’m hearing, well, I don’t like to hear 10 cents and above."

AMM’s delivered premiums for spot zinc held at 9 to 10 cents per pound Sept. 12, still above the 8 to 9 cents reported in June.

"Premiums on raw zinc are going to definitely go up next year if the minerals companies are able to push (higher contract premiums) through," a second alloy maker said, adding that he expects spot premiums will be over 10 cents next year.

Ongoing queues to move zinc out of London Metal Exchange-approved warehouses in New Orleans continue to restrict supply to the market, sources said. According to the most recent LME data, 12,150 tonnes of zinc entered warehouses in New Orleans from Sept. 6 to Sept. 11 while 10,050 tonnes were delivered out, bringing LME stocks in US-based warehouses to 718,650 tonnes Sept. 11.

Demand for zinc remains low but premiums are likely holding as producers look to combat falling LME prices.

The LME’s three-month zinc bid price has averaged $1944.29 per tonne so far in 2013, down 2.46 percent from $1993.34 per tonne in 2012.

Zinc cash prices have fallen from a peak of $1,955.5 per tonne (88.5 cents per pound) Aug. 19 to $1,833.50 per tonne (83.2 cents per pound) Sept. 13.

"We don’t see any new business out there," the first alloyer said, though he added that his company is busy with current business until February.

Construction and automotive are two markets to watch for increased zinc demand, but as automakers try to reduce vehicle weight for fuel economy standards zinc use has declined, the third alloy maker said.

The first alloy maker agreed, saying one of his clients is experimenting with plastic ignitions , rather than zinc-based ignitions.

Until construction and housing recover, alloy makers will lack growth opportunities, the third alloyer said.

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