April 29, 2020 / 5:35 AM / 3 months ago

METALS-Shanghai zinc jumps to 2-month high on supply tightness

(Updates prices)

By Mai Nguyen

SINGAPORE, April 29 (Reuters) - Zinc prices advanced on Wednesday due to supply disruptions caused by the coronavirus pandemic and as improving demand in China added support.

The most traded June zinc contract on the Shanghai Futures Exchange (ShFE) climbed as much as 2.1% to 16,415 yuan ($2,320.01) a tonne, its highest since Feb. 28. The contract closed up 1.8% at 16,365 yuan a tonne.

Benchmark three-month zinc on London Metal Exchange (LME) rose as high as $1,947.50 a tonne, the highest since April 20, before easing slightly to trade up 0.9% at $1,947 a tonne at 0705 GMT.

"Zinc treatment charges (TCs) declined very fast in recent weeks due to the shortage in supply of concentrate and we expect some zinc smelters to cut production in Q2-Q3," said Dina Yu, analyst at CRU Group.

Spot TCs of zinc AM-TC50-ZNCON, or fees that miners pay smelters to process zinc ore into refined metal, have been hovering at a one-year low of $245 a tonne, data from industry pricing and information provider Asian Metal showed.

"Demand is recovering in March and April (in China), but the demand for export is weakening slightly," Yu said.

FUNDAMENTALS

* PREMIUMS: Bonded warehouses zinc premiums in China ZN-BMPBW-SHMET were at $85 a tonne on Monday and Tuesday, their highest since March 9. A trader said it was briefly profitable to import zinc into China due to the LME-ShFE price differences.

* ZINC STOCKS: Zinc inventories in warehouses tracked by ShFE ZN-STX-SGH fell to 133,349 tonnes on Friday, the lowest since Feb. 14, latest data showed.

* SPREAD: The discount of LME zinc cash over the three-month contract CMZN0-3 shrunk to $6.25 a tonne, its smallest since March 20, indicating the tightening of nearby supplies.

* FED: The U.S. Federal Reserve is due to make an announcement on interest rate policy later on Wednesday.

* PRICES: LME copper rose 0.1% to $5,225.50 a tonne, aluminium eased 0.03% to $1,504 a tonne, while Shanghai copper was up 0.5% to 42,510 yuan a tonne and aluminium increased 1% to 12,585 yuan a tonne.

* MINING: As South Africa and Peru move to lift lockdowns, mining workers are resisting returning to work without adequate protective gear and information about cases at sites.

* SCOTIABANK: Bank of Nova Scotia (Scotiabank) told staff on Tuesday it would close its metals business, sources told Reuters.

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$1 = 7.0754 Chinese yuan renminbi Reporting by Mai Nguyen; Additional reporting by Tom Daly in Beijing; Editing by Uttaresh.V and Amy Caren Daniel

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