Zinc rises as stockpiles drop

PUBLISHED : Tuesday, 29 July, 1997, 12:00am
UPDATED : Tuesday, 29 July, 1997, 12:00am

Zinc prices moved to seven-year highs yesterday as at least one mainland smelter scrambled to cover short-positions.

The metal also rose as the effects of an annualised 200,000-tonne shortfall were felt in the market, and stocks fell.

Traders said zinc for three-month delivery rose more than 3 per cent to US$1,674 per tonne. Stocks in London Metal Exchange (LME) warehouses were reported to have declined by 6,775 tonnes to 393,525 tonnes.

Mainland firms have badly misjudged the market this year - betting that prices would fall and take huge short-positions.

Yesterday, an official from the China National Nonferrous Metals Corp (CNNC) reportedly estimated that mainland zinc smelters were short by 250,000 tonnes and that it was considering an attempt to bail them out.

The Zhuzhou smelter is among those said to be most short and the CNNC has borrowed about 40,000 tonnes from the State Reserve Bureau, to assist it. At least two other smelters are also short.

Some reports have put mainland zinc smelter losses at up to $100 million.

This month, three-month zinc is up more than 14 per cent.

It is rumoured that a key long-position is being held by the Switzerland-based trader Glencore, which is attempting to squeeze the zinc market higher.

'There is a continued debate over whether China can fulfil its obligations to the LME, and deliver enough metal to warehouses to close out its positions,' Brandeis metals analyst Robin Bhar said. 'As there is some possibility of them not being able to, investment funds and other speculators are pushing it higher and higher.'


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