Zinc imports to weigh on domestic prices as import arbitrage opens

SHANGHAI, May 3 (SMM) – An inflow of imported zinc is likely to weigh on domestic prices after the arbitrage window opened in May.

Several factors contributing to the opening of the arbitrage window include a delivery of 56,500 mt into LME warehouses last month, a declining social inventory in China amid the high season, and the value-added tax (VAT) cut in China. This has led the SHFE/LME price ratio to rise.  

Small amounts of zinc including materials from Australia, South Korea and Spain were heard in the Shanghai market on Thursday May 3, as import losses have narrowed to just 50-70 yuan/mt last night.

Offers of these materials were mostly about 30 yuan/mt below those of the domestic 0# common brand. It takes about a week for imported zinc to be delivered from bonded areas.

However, spot trading was thin on Thursday as buyers held back due to sufficient supply and high spot premiums. The 0# common brands were heard traded at a premium of 210-230 yuan/mt over the SHFE 1806 contract, while Shuangyan traded at premiums of 220-250 yuan/mt.

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