SINGAPORE, Aug 07, 2011 (Dow Jones Commodities News via Comtex) -- Zinc premiums in Singapore warehouses are steady at high levels as traders holding metal attempt to get the highest price possible for the small volumes of metal left in the city-state's terminals, according to traders familiar with the matter.
Special high-grade zinc, mostly Korean in origin, is being offered between $95 and $110 a metric ton in London Metal Exchange-bonded warehouses in Singapore, even as global stocks stand at record highs and consumption remains low in China amid slack third-quarter demand, traders said last week.
The Singapore premiums are $25 higher than the charges to secure similar grades of metal in the nearby Malaysian terminal of Johor, several physical traders said. They said Johor premiums for Namibian zinc are at $70/ton and for lower-grade Indian zinc at $30/ton-$35/ton.
"If you want to get the lower premiums, you have to go to Malaysia," a Singapore-based physical trader said. One large trading house owns most of the metal in Singapore and is prepared to wait out slow summer trading conditions to sell the metal to a buyer willing to pay their high terms, two traders said.
"Because Singapore stocks are very low, whoever has the remaining material and has it in good brands is offering high for it," said a second Singapore-based physical trader. Premiums have been trading between $75 and $100 for most of the year, he said, adding that he had been expecting charges to soften slightly with the onset of the third quarter, as occurred in Malaysia.
"Johor and Port Klang premiums are much cheaper."
Zinc stocks in Singapore are only 2,875 tons, down from 3,150 tons a month earlier. Johor warehouses hold 83,675 tons of zinc and Port Klang has stock totaling 77,250 tons. Total LME zinc stocks are 887,475 tons.
The physical zinc market has been extremely weak in the last month, with Chinese buyers reluctant to pay elevated prices on the LME, particularly when domestic stocks are thought to be close to 1 million tons and demand from steel makers is slow.
A sharp selloff on the LME in the last few days may help encourage some Chinese buying activity, but enquiries will likely be for low volumes, market participants said. Three-month zinc opened at $2,200/ton Monday, down 12% since the start of the month.