BEIJING, Aug. 25 (Platts) -- China's monthly refined zinc imports are expected to rise in the second-half of the year, from the first half, due to an open arbitrage that benefits consortiums of buyers and a lower import tax implemented from July 1, industry analysts said Tuesday.
An improvement in the arbitrage trade ratio between London Metal Exchange and Shanghai zinc prices since last week made import trade lucrative, the analysts added. Imported zinc stocks are kept at LME warehouses in Europe, then reshipped to China.
"With the opening of arbitrage trade opportunities since last week, it's possible that China's monthly zinc imports in the coming months may exceed June levels," a China Securities Co. analyst said.
"[Imported zinc trade] has become profitable since last week. [The open arbitrage], plus the lower import tax, would encourage consortium buyers to import in the months to come," he added.
Beginning July 1, China lowered the import tax for refined zinc to 1%, from 3% previously.
In Beijing, a commodity analyst with a subsidiary of Galaxy Securities said: "Back in H1, [the downstream processing sector] mainly consumed their [zinc] inventories, so did not import on a large scale, as seen in the lower year-on-year monthly zinc import volume back in April-May.
"[Zinc import trade] mostly incurred losses in H1," he added.
China imported 25,317 mt of refined zinc in June, up 17% year on year, customs figures showed. Similarly, its H1 refined zinc imports rose 16% year on year, to 167,473 mt -- Kazakhstan, Australia, Peru and South Korea accounted for 55% of the total import volume.
A few industry experts, however, expect China's 2011 national refined zinc imports to grow only moderately from 2010 on the back of a surplus in the domestic market.
Zinc inventories at Shanghai Futures Exchange's warehouses hit 421,192 mt on August 19, up 20,742 mt from August 12.
The Beijing analyst said: "We see zinc imports in the coming months to be more than the June levels, due to better arbitrage, as well as demand by consortium buyers, and subcontracted raw materials processing deals. But the national zinc import volume this year is expected to register just a single-digit percentage growth due to the lackluster mainland Chinese demand."
Similarly, a zinc analyst with Nanhua Futures Company said: "We see that by September-October, when the boom zinc buying season [in China] comes, there may be a need to replenish stocks, thus lifting imports by then.
"But overall, we don't see China's 2011 zinc import volume to be considerably greater than last year, due to the not-so-strong demand back in H1," she added.