Glencore Slashes Zinc Premiums for China in 2016

SHANGHAI, Dec. 17 (SMM) - Glencore cut zinc premiums under term contracts for Chinese importers from $130-160 to $110-125 per tonne in 2016, the same level with those by Korea Zinc and Hindustan Zinc. Some importers signed term contracts lower at $100-120 per tonne, SMM understands.

What’s behind the drop in zinc import premiums？

Yuan’s devaluation, soft demand and high inventories led to lower import premiums on zinc for Chinese buyers, SMM says.

“The yuan has depreciated about 5% since August, leading to nearly 100 yuan per tonne in losses for importers failing to lock exchange rate, and combined with expectations of further devaluation in the yuan next year, importers have been very hesitate to place orders,” said an SMM zinc analyst.

Imports under term contracts are also slow due to market bearishness. Combined zinc reserves in Shanghai, Tianjin and Guangdong added some 150,000 tonnes since the start of the year, and this inverted spot premiums of #0 zinc in Shanghai from 400-500 yuan per tonne in mid-November to discounts against February delivery zinc on the SHFE, which are still expanding.

“Zinc smelters and traders used to sign term contracts for imports in November over the years past, but talks on import premiums did not begin until December this year.” the analyst noted.

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