London — Zinc premiums in Europe remained flat in August due to the summer lull, though with some spot activity reported this week, as spreads turned from a deep backwardation to a contango, sources said.
In June and July, backwardation on the LME cash to three-months spread had put pressure on physical premiums, however on Monday it disappeared.
A trader had attributed backwardation to a combination of fundamentals but also said there was not much metal in the LME system.
The cash-to-three months spread stood at a $16/mt contango on Tuesday closing from a $51/mt backwardation last Monday.
"Contango is improving things but still there is not much activity," a second trader said.
"We don't hear anymore the big discounts we had a few weeks ago on physical premiums," he added.
He reported premium levels for small clips at $100/mt plus LME cash FCA Rotterdam for prompt delivery.
A third trader however still saw on Monday the premium levels lower than the $100/mt level, at around $85-$90/mt plus LME cash FCA Rotterdam for prompt.
"It's partly because of the backwardation, partly because there is warrant availability in Europe," he said.
The first trader had stated in late July that premium levels were definitely above $100/mt FCA Rotterdam but probably below the annual levels of $130-$140/mt, same basis.
"I haven't heard anything as low as $80/mt FCA basis, perhaps warrants," he added.
Based on that, S&P Global Platts assessed the European duty-paid SHG zinc monthly premium at $90-$110/mt plus LME cash in-warehouse Rotterdam on Wednesday, unchanged from a month ago.
Meanwhile, LME data showed that on-warrant zinc stocks have increased by 23,750 mt or 11% since last Friday at 236,100 mt.
Total zinc stocks have reached their highest level since October 2017 on Tuesday at 256,175 mt. Stocks built up has continued in the European LME warehouses of Antwerp, with total zinc stocks at 76,200 mt on Wednesday, up 27% month-on-month.
LME zinc three-months price has kept tanking in August and was at $2,454/mt on Tuesday closing, down 6% week-on-week and 27% lower year-to-date.
