Metals News
SHFE Adds Six Nonferrous Metal Registered Warehouses, Zinc Storage Capacity Increases 80 kt
smm insight
Dec 27,2010

SHANGHAI, Dec. 27 (SMM) -- The Shanghai Futures Exchange (SHFE) said on December 20th that it has approved six companies which applied to become registered warehouses.  These new warehouses will now add 80 kt to the present zinc storage capacity. 

The newly approved registered warehouses include:

Zinc Storage Capacity
Shanghai Tongsheng Logistics Park Investment & Development Company
Luchao, Shanghai
15 kt
Wuxi Guolian Logistics Company
Luoshe Town, Huishan District, Wuxi
20 kt
Ningbo Jiulongcang Warehouse Company
No. 299 Pinghai Road, Zhenhai District, Ningbo
5 kt
China's State Reserve Bureau's Zhejiang 837 Bureau
Zhenhai District, Ningbo
10 kt
Guangdong Shengshi Nonferrous Metal Storage and Logistics Company
Xiaotangxi Warehouse
20 kt
Zhejiang Kangyun Storage Company
Zhuji Warehouse
10 kt

SMM believes the approval by SHFE of the six registered warehouses was made to help meet market demand. Inventories in registered warehouses in Shanghai began to surge in  September since expanding spot discounts were favorable for buying spot goods and selling futures contracts. Spot discounts in October widened even further to nearly RMB 1,000/mt, opening an arbitrage window between SHFE and spot markets. Although downstream producers adopted a wait-and-see attitude toward higher zinc prices, traders were more willing to purchase spot goods and sell futures contracts, causing inventories in registered warehouses to grow rapidly. SMM sources report that Cao'an warehouse has reached its full zinc storage capacity and was forced to ship zinc ingots to other warehouses.

Shanghai is a major spot zinc trading center, a major transshipment hub for east China, and is located among major zinc downstream consumers.  In this context, shipments by major zinc smelters to Shanghai and its surrounding areas have been increasing each year. Guangdong province, another major spot zinc trading center, is also becoming more influential, so many Shanghai-based traders have been focused on developing Guangdong markets. In this context, it is reasonable for SHFE to set up registered warehouses in Jiangsu, Zhejiang, and Guangdong provinces.   

The new registered warehouses are scattered throughout Shanghai, Jiangsu, Zhejiang, and Guangdong provinces, all major nonferrous metals trading centers. SMM believes SHFE's move will allow smelters to choose the nearest warehouse as a storage location for goods, which will reduce transportation costs. In addition, the distribution of registered warehouses will also increase SHFE ability to combat market manipulation.  


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