European physical zinc premium slipped this month due to a steep backwardation and high London Metal Exchange zinc prices that have put pressure on spot premiums, market sources said Wednesday.
"People need zinc, but they buy small quantities for the short term," a trader said, adding that he would not buy more metal than he could sell.
S&P Global Platts assessed the European duty-paid SHG zinc monthly premium at $105-$120/mt plus LME cash in-warehouse Rotterdam on Wednesday, down from $125-$135/mt last month, on a wide range of trades and indications.
The trader reported selling duty-paid metal at around $135-$140/mt plus LME cash FCA Rotterdam for prompt delivery.
However, a second trader said he had a spot deal just after LME Week at the beginning of November for duty-paid metal at a $80-$90/mt premium plus LME cash FCA Rotterdam.
"For small clips you might be able to get $130/mt but for larger clips not," the second trader said.
A third trader said before LME Week that he would try to buy metal at around $105-$110/mt plus LME cash FCA Rotterdam, while a few days later said premiums were definitely below the $140/mt premium level, same basis.
A fourth trader/supplier said he still saw premiums around $140/mt plus LME cash FCA Rotterdam for prompt deliveries.
Most market sources said demand was good but not booming given the steep backwardation and high LME prices.
The LME cash-December spread stood in a $17/mt backwardation at Tuesday's close from $12/mt Monday.
In late October, the spread had exceeded a $40/mt backwardation. The December 2017-December 2018 spread was at a $96/mt backwardation.
LME stocks continued their downturn, with total zinc LME stocks at 232,100 mt as of Wednesday, their lowest level since December 2008.
"We might see things change if stocks reach 2007 levels," the first trader said.
The official cash price settled at $3,190.5/mt Wednesday.
The arbitrage opportunity between SHFE and LME prices remained closed, with the third trader reporting a lack of buying interest in China currently.
Market participants were looking to the Antaike conference next week for a clearer direction on the Chinese market and premiums.
2018 PREMIUMS ROUGHLY UNCHANGED
Most market sources said premium levels for next year were roughly flat from last year.
The second trader put 2018 duty-paid metal premiums at $130-$140/mt plus LME cash FCA Rotterdam and $190-$195/mt plus LME, delivered Italy, for net-30 payment terms.
The first trader also said Cal18 premiums were flat.
"Producers try to push for higher premiums for next year," the third trader said, adding that he had deals at a slightly higher premium than last year.
The fourth trader said 2018 premiums could be $5-$10/mt higher than this year's but no more than that.
