Even as the London Metal Exchange tries to reassemble the pieces of its broken nickel contract, there are signs that zinc could be the next metal market to find itself in turmoil.
There’s a strong sense of deja-vu with both the LME copper market, which had to be restrained last October, and the nickel contract, which had to be suspended in March.Almost 60,000 tonnes of LME zinc stocks have been canceled in preparation for physical load-out since the start of the month. Singapore was raided to the tune of 40,000 tonnes with the balance split between Baltimore and New Orleans.
European zinc premiums are at record highs and rising, according to Fastmarkets, which has just lifted its North European assessment by another $10 to $440-500 per tonne over the LME cash price. Noranda Income Fund, which owns the plant, has cut its 2022 production forecast by 15,000 tonnes to reflect operational problems in the first quarter of the year.
Fitch, for example, has raised its 2022 average forecast from $2,900 to $3,500 per tonne, citing the prospect of a deeper supply deficit of 172,000 tonnes this year after an estimated 48,000-tonne shortfall in 2021.The depletion of freely available LME stocks has inevitably tightened time-spreads, the cash premium flexing out to $85 at the start of April and valued at a still wide $55.50 at Friday’s close.
Relative to Friday’s closing prices, the total upside volumes in place come to 88,000 tonnes and 93,000 tonnes in May and June respectively.