Chinese zinc prices slump but it may rebound from the bottom
2007-06-27 11:03:55 【Print】
BEIJING (Asian Metal) 27 Jun 07 – Dampened by the great decline of futures zinc on SHFE, spot zinc prices slumped greatly in Chinese spot market, down by about RMB1,000/t (USD131/t) compared with that on Monday. However, market participants expected that zinc price would rebound from the bottom in the coming days, due to the high cost of raw materials and zinc export increase this month.
An official from a Shaanxi-based zinc smelter reported that although 3-month zinc only dropped by about USD20/t to USD3,530/t on LME on Monday, August zinc on SHFE dropped sharply by RMB1,085/t (USD142/t) to RMB26,455/t (USD3,472/t) on Tuesday, due to the high stockpiles of zinc ingot in Chinese market.
“With the futures zinc dropping on SHFE, we have to lower our spot zinc ingot price,” said the source. “Some sellers even quoted as low as RMB26,500-26,600/t (USD3,478-3,491/t) for HG zinc ingot in the Shanghai market, but we conclude some small deals at RMB27,000/t (USD3,543/t) delivered to Shanghai market, down by about RMB1,000/t (USD131/t) compared with that on Monday.”
According to the source, the raw materials zinc concentrate price did not drop as much as that of zinc ingot price so far, as zinc ingot price has not stabilized at the current low levels. “Therefore, there may be little profit margin left for smelters now,” said the source. “The price of zinc concentrate 55%min is at around RMB20,000/t (USD2,625/t) ex works, and the availability of the material is limited in the local market.”
The source expected that after the great drop in the recent days, there may be limited room for zinc ingot price to drop further in the market, supported by the high production cost. “If zinc price does not decline further on LME, the export of zinc ingot from China is likely to increase in the short term, digesting some zinc stockpiles in Chinese market.”
The zinc smelter, the capacity of which was expanded from 30,000tpy to 60,000tpy in April, is running with its full capacity of 60,000tpy now.
A Zhejiang-based trader, who mainly deals with SHG zinc ingot produced in Zhuzhou Smelter, said that the current demand for zinc ingot price is very slow, scared off by the volatile and slumping zinc price.
The trader concluded about 10t of SHG zinc ingot at RMB27,500/t (USD3,609/t) delivered to the local customer’s warehouse, dropping from RMB28,500/t (USD3,740/t) on Monday. “Our quotation is really much higher than the price of zinc ingot produced by some small-sized smelters, who quoted RMB26,500/t (USD3,478/t),” said the source. “However, I believe that zinc ingot price has hit the bottom, and it will bounce up in the future, though the rising margin may be very limited.”
According to the source, the availability of SHG zinc ingot produced by some major Chinese zinc smelters is low, as they are busy exporting the metal, due to the low and sluggish zinc price in domestic market. The source expected that zinc export will rebound in June.
