Chinese zinc smelters and traders have been rushing to secure export contracts since last week, as a sharp fall of domestic prices made them more attractive, traders said Wednesday.
"Exports are now profitable, and contract volumes may total 30,000 (metric) tons in June," said an executive with a trading company in Tianjing.
Traders chose to remain on the sidelines when prices first began to fall, but now as they need positive cash flows, they began to sell on the domestic market, which further pressured cash values, he said.
Chinese zinc exports were slightly above 10,000 tons in April and May, as higher domestic prices kept the metal in the country instead of being exported.
With domestic prices now falling below smelter production costs around CNY27,000-CNY28,000/ton, smelters and traders hope to export to lock in profits, said a zinc trader in Shanghai.
Spot zinc was quoted around CNY25,350-CNY27,350/ton in Shanghai Wednesday.
The three-month London Metal Exchange zinc price was quoted at $3,360/ton at 0609 GMT.
Analysts said speculators have driven zinc futures traded on Shanghai Futures Exchange to an unreasonably high price after it was launched in end-March, while the domestic spot market is in a surplus.
"Since the futures were launched, physical trading has become more complicated, and the volatility of futures has turned the outlook (of exports) murky," said the trader in Shanghai, who has been trading nonferrous metals for more than a decade.
"It's hard to say whether the cash price will return back to the production cost in the near term, but the domestic market is under pressure to export," he said. – Hoovers
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