Chinese Zinc Producers Rush to Deliver 40,000 Tons to Shanghai Futures Exchange
Chinese zinc producers are racing to deliver between 30,000 and 40,000 metric tons of refined zinc to warehouses registered with the Shanghai Futures Exchange (ShFE) ahead of the November contract expiry on Friday, according to three sources with direct knowledge of the situation. This significant delivery is expected to raise zinc stocks in the ShFE system to between 56,524 and 66,524 tons, which is likely to affect zinc prices.
The influx of deliveries has already impacted the market, with zinc prices dropping by 4% to 24,638 yuan since last Friday. More than a dozen of China's producers, including subsidiaries of Zijin Mining and Jiangxi Copper, are delivering their unsold zinc to ShFE warehouses, the sources said, highlighting concerns about surplus zinc in the world's largest consumer as the construction and real estate sectors show little sign of recovery.
Zinc stocks in ShFE-monitored warehouses have nearly doubled this week with deliveries of 24,039 tons, bringing total stocks to 50,563 tons as of Thursday. The rate of increase in ShFE zinc stocks will depend on how quickly the Shanghai exchange approves the deliveries, with expectations of even higher levels on Friday as the monthly contract matures.
Market participants holding zinc positions on ShFE must then decide whether to close or roll over their positions, with delivering physical metal being one way to close short positions. Despite the influx of physical metal, zinc has been one of the best-performing metals on the ShFE. The front-month zinc contract has gained 16% so far this year to 24,975 yuan per ton, outperforming other metals like copper, which rose by 6.4%, and aluminium, which increased by 5.7%.
However, challenges remain. China’s August zinc consumption fell by 3% to 581,000 tons, according to data from the World Bureau of Metal Statistics. A recent Reuters poll indicated that the global zinc market is expected to see a surplus of 115,000 tons next year, adding to concerns over excess supply and potential price pressures.
