Just how much Chinese zinc is still sitting in warehouses in Singapore was a question that had Far East metal traders guessing on Monday as the metals price hit seven-year peaks and looked set to go higher.
Figures released on Friday by the London Metal Exchange (LME) show warehouses in Singapore holding 27,975 tonnes of the LMEs total zinc stock of 424,475 tonnes.
Traders throughout the region said most of the material on warrant in Singapore was believed to be Chinese though just how much they either did not know or would not say.
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I believe that in Singapore, there are least 20,000 tonnes of zinc off-warrant now, bits and pieces waiting to sell to the market now on a cash basis, a trader in Singapore said.
A warrant is a document of title to metal stored in an LME registered warehouse stating the particulars of the metal as it is available to the market. With LME zinc having touched seven-year highs on Friday above $1,400 a tonne, traders said up to 10,000 tonnes of Chinese zinc could be added to the warehouses this week.
Zinc moved to its highest level since October 1990 in Friday trading achieving a top price of $1,405 a tonne. However, end-of-week profit-taking pared some of its gains, and three months metal ended slightly lower at $1,399 by the end of the kerb which was still up $6 from Thursdays finish.
A trader in Singapore said he expected at least 5,000 tonnes of Chinese metal to be added to the Singapore figures. A source, who markets on behalf of a Chinese manufacturer, said up to 10,000 tonnes could be seen coming out. This will go on warrant because it is the best way to sell it, the marketing source said.
The major Chinese manufacturers either refused to comment or were not available on Monday. Rumours that one of the Chinese manufacturers was short in the market, having sold zinc options at $1,250, could not be confirmed with the company in question.
However, traders said the factory was now selling its zinc at premiums of $70 to $80 a tonne over the LME cash price.They are not losing money, another trader said. They hedged at a certain level, and now the premium makes up the difference, she added.
By contrast, unregistered Chinese zinc was available at a discount at major Chinese ports of $10-20 FOB (free on board), traders said. Other registered metal was also heard offered at a discount of $30-40 a tonne.
In the copper market, Chinese traders holding copper in bonded warehouses in Shanghai were keen to take advantage of the cash-to-three months backwardation which flared out to $140 on Friday from $115, Far East traders said. (Reuter)
One of the Singapore-based sources said 5,000-7,000 tonnes of copper should be added to LME warehouse stocks in the city-state from weekend arrivals from Shanghai. (Reuter)
Delivering back to the LME was a much more attractive option than delivering onto the Shanghai Metal Exchange, he said.
Market sentiment in Shanghai is weak with local supply seen adequate and keeping physical prices, now around $2,740 per tonne, flat.
Shanghai copper futures opened sharply down in slow trading on Monday, with the most active October 1997 contract opening down 210 yuan at 23,180 yuan per tonne.
This followed a weak LME copper market on Friday where prices failed to break the $2,600 resistance level, ending near the days low of $2,567 compared to Thursdays $2,858,50.
If the market stops at this level, they will definitely be delivering, the Singapore source said of Chinas copper traders. (Reuter)