The majority of zinc participants see the market moving in one direction
this week, with demand sluggish and metal being locked up in warehouse
financing deals, as London Metal Exchange Warehouse stocks held firmly above
1 million mt, sources said.
Most believe that the metal is likely to continue to be locked up in financing deals like fellow LME contract aluminium.
Zinc is a key alloy in galvanizing steel. As the steel market has stumbled, so too has demand for zinc. As such, LME inventory has continued to rise. Although stocks dipped a modest 3,025 mt Friday, total LME-registered stocks were still above 1 million mt, at 1,142,900 mt.
One source said it was likely the market would see more banks moving to the sector for financing deals in warehouses. Citi Bank recently put out a note saying the metal could go the same way as aluminium.
Some 5,052,625 mt of aluminium is currently tied up in contango financing deals in LME-warehouses. But a physical trader argued that demand for zinc simply wasn't strong enough to cause the metal to head the same way as aluminium: "If you want metal you can get it," he said.
One analyst countered, however: "Yes, there is metal out there if you want it -- but you've got to pay for it," to the premiums plus LME cash.
SHOCK INCREASE
Barclays said in a research note earlier in the week that Chinese September import data showed that, "surprisingly, there was a shock increase in refined zinc imports, to the highest level seen since May 2009."
The bank noted that, "while the domestic market has certainly tightened following smelter production cuts, from a structural point of view, China is not a country currently in need of zinc metal, in our view. However, the tightness created by smelter cuts has resulted in a widening of the SHFE/LME price arbitrage and this has attracted additional metal in as a result."
Platts assessment of SHG zinc premiums on Friday was $120-130/mt, from $105-125/mt previously, plus LME cash, in-warehouse Rotterdam.
"The global markets for aluminium and zinc have run sustained and substantial surpluses in the five years since the first tremors of the financial crisis were felt in 2007," Macquarie said in a research note.
"This is the result of record output rather than disappointing demand. However, output should not be confused with availability. Indeed, access to metal units has sometimes been limited, and the price of access inflated, by stock holding and financing activities," the Australian investment bank added.
Still, another source said although a range on premiums of $120-130/mt was fair, "there's nothing going on in the physical market."
LEAD MARKET QUIET
Looking at sister metal lead, sources said the market was also currently quiet. "There is a high level of uncertainty," a trader said. He added that there was not too much material on the ground in Europe and that it was difficult to book large quantities at moment. He said that premiums were around the $50-70/mt level plus LME cash.
A second trader also said that there was little activity in the European lead market. "We have not done too much, just some small quantities around 150 mt. We have sold at the $70/mt level," he said.
Platts assessment of premiums for 99.985%-grade were unchanged at $50-70/mt plus LME cash, in-warehouse Rotterdam.
Lead stocks were up 450 mt Friday at 310,325 mt.
One trader said that "lead and tin are the metals with the most upside at present."
Lead, which is used primarily in car batteries, was being supported by growing car numbers in emerging markets.
http://www.platts.com/RSSFeedDetailedNews/RSSFeed/Metals/8855524
Most believe that the metal is likely to continue to be locked up in financing deals like fellow LME contract aluminium.
Zinc is a key alloy in galvanizing steel. As the steel market has stumbled, so too has demand for zinc. As such, LME inventory has continued to rise. Although stocks dipped a modest 3,025 mt Friday, total LME-registered stocks were still above 1 million mt, at 1,142,900 mt.
One source said it was likely the market would see more banks moving to the sector for financing deals in warehouses. Citi Bank recently put out a note saying the metal could go the same way as aluminium.
Some 5,052,625 mt of aluminium is currently tied up in contango financing deals in LME-warehouses. But a physical trader argued that demand for zinc simply wasn't strong enough to cause the metal to head the same way as aluminium: "If you want metal you can get it," he said.
One analyst countered, however: "Yes, there is metal out there if you want it -- but you've got to pay for it," to the premiums plus LME cash.
SHOCK INCREASE
Barclays said in a research note earlier in the week that Chinese September import data showed that, "surprisingly, there was a shock increase in refined zinc imports, to the highest level seen since May 2009."
The bank noted that, "while the domestic market has certainly tightened following smelter production cuts, from a structural point of view, China is not a country currently in need of zinc metal, in our view. However, the tightness created by smelter cuts has resulted in a widening of the SHFE/LME price arbitrage and this has attracted additional metal in as a result."
Platts assessment of SHG zinc premiums on Friday was $120-130/mt, from $105-125/mt previously, plus LME cash, in-warehouse Rotterdam.
"The global markets for aluminium and zinc have run sustained and substantial surpluses in the five years since the first tremors of the financial crisis were felt in 2007," Macquarie said in a research note.
"This is the result of record output rather than disappointing demand. However, output should not be confused with availability. Indeed, access to metal units has sometimes been limited, and the price of access inflated, by stock holding and financing activities," the Australian investment bank added.
Still, another source said although a range on premiums of $120-130/mt was fair, "there's nothing going on in the physical market."
LEAD MARKET QUIET
Looking at sister metal lead, sources said the market was also currently quiet. "There is a high level of uncertainty," a trader said. He added that there was not too much material on the ground in Europe and that it was difficult to book large quantities at moment. He said that premiums were around the $50-70/mt level plus LME cash.
A second trader also said that there was little activity in the European lead market. "We have not done too much, just some small quantities around 150 mt. We have sold at the $70/mt level," he said.
Platts assessment of premiums for 99.985%-grade were unchanged at $50-70/mt plus LME cash, in-warehouse Rotterdam.
Lead stocks were up 450 mt Friday at 310,325 mt.
One trader said that "lead and tin are the metals with the most upside at present."
Lead, which is used primarily in car batteries, was being supported by growing car numbers in emerging markets.
http://www.platts.com/RSSFeedDetailedNews/RSSFeed/Metals/8855524
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