Zinc highs spur export race FROM "THE STANDARD"
Wednesday, November 08, 2006
Smelters and merchants in mainland China are increasing exports of spot zinc to take advantage of record-high world prices ahead of a deadline for the ending of tax rebates, industry sources said.
China's exports of refined zinc might triple this month from September to as much as 50,000 tonnes, the sources said.
Supply of zinc in the mainland has risen since Zhuye Torch and Baiyin Nonferrous Metals resumed production at their respective 200,000 and 100,000-tonne-per-year zinc plants last week. The plants were closed for repairs last month.
"I think exports in November and December will be large," a Zhuye trade manager said.
The benchmark three-month zinc contract on the London Metal Exchange traded at record highs Tuesday and has gained more than 130 percent so far this year as zinc stocks monitored by the exchange edged to their lowest in over a decade.
"We are exporting as much as we have this month," an official for a zinc smelter in northwestern China said. Exports would reach 5,000 tonnes, he said.
"All the special high-grade zinc is being exported," a trader in Shanghai said. Rising exports had pushed up premiums on special high-grade zinc to as much as 1,000 yuan (HK$987.50) per tonne over prices of low-grade in the city, against 50 yuan in January, he said.
Special high-grade zinc contains 99.995 percent or more of metal, which is required by the LME for delivery against its zinc contract and is the most popular grade among overseas buyers.
Mainland smelters and merchants are exporting more spot zinc in lower grades to take advantage of a tax rebate that ends the middle of next month.
On September 15, Beijing canceled a 5 percent tax rebate on exports of zinc in low-grade forms, which contain less than 99.995 percent metal. It has extended the rebate to existing contracts until December 14.
But Beijing has kept the rebate on exports of special high-grade zinc.
Spot special high-grade zinc traded at about 34,500 yuan per tonne in Shanghai, down 4 percent from a peak of 36,000 yuan in May.
With the rebate, exporters enjoyed a profit of US$100 to US$150 (HK$780 to HK$1,170) a tonne, traders said.
"The last few weeks have opened up opportunities. We estimate about 20,000-30,000 tonnes have gone out," said a trader at a Shanghai smelter.
Smelters were offering spot zinc at premiums of US$20 to US$30 per tonne over cash LME prices in mainland ports, officials said.
The offers were well accepted by overseas buyers. "We are buying because there is demand in other areas," an executive for an international trading house said. The firm was shipping part of its purchases from China to Europe as demand for spot zinc in Asia was not strong, he added.
A mainland merchant receiving monthly imports of zinc under contracts for this year said his firm was unloading its zinc stocks on overseas markets.
The merchant in August and September re-exported about 30,000 tonnes in low-grade forms stored in a bonded warehouse in Shanghai. He was reselling the same grades of zinc stored in Singapore at premiums of US$70 over cash LME zinc prices.
REUTERS