SHANGHAI, Jun 26 (SMM) – China imported 59,300 mt of refined zinc in May, down 23.57% from April but up 0.32% from May 2018, showed data from China Customs.
This brought imports in the first five months of the year to 277,600 mt, some 19.66% higher than the same period last year.
About 92% of May’s zinc imports originated from Kazakhstan, Australia and South Korea, reflecting that supplies under long-term contracts accounted for the majority.
Particular concern was that 10,700 mt of #2 zinc entered China last month, with 9,900 mt from the United Arab Emirates. This is greater than the usual monthly imports of such materials of up to 2,000 mt since 2018, as a high iron content deterred Chinese consumers from using #2 zinc.
Excluding #2 zinc from the UAE, China’s imports of refined zinc came in at 49,400 mt in May, down 36.37% month on month and 16.48% year on year.
This would narrow the year-on-year increase in imports in January-May, which stood at 267,600 mt, to 15.38%.
While the SHFE/LME zinc price ratio nudged up from 7.62 in April to 7.7 in May, the average import losses widened 170 yuan/mt to 1,610 yuan/mt, according to SMM calculations.
Zinc inventories across LME-approved warehouses barely expanded, despite the backwardation structure on LME zinc climbed to a high of $161/mt in May. This sparked concerns about near-term supplies overseas and buoyed LME zinc.
Meanwhile, domestic market focus was largely attuned to supply increase following the breaking of capacity bottlenecks. This, together with increased demand concerns in the wake of the escalation of the US-China trade dispute, weighed on SHFE zinc and further eroded import arbitrage opportunities.
While a short squeeze strengthened SHFE zinc later in the month, the SHFE/LME ratio pulled back shortly after the June delivery, keeping import losses high. This is set to keep import trades sluggish.