Column: China Increases Exports as West Shortages of Lead and Zinc: Andy Home


LONDON, July 28 (Reuters) – China’s historical lead and zinc trade patterns were turned upside down in the first half of this year, with imports plummeting and exports rising.

The country became a net exporter of refined zinc in April-June for the first time since 2014. Year-to-date refined lead exports are the highest since 2007.

Outbound shipments of both metals in refined form are subject to an export tax – 10% in the case of lead, 15% for zinc – which has acted as a major restriction on exports in the past.

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That so many metals have crossed the tax barrier says a lot about the level of scarcity in the rest of the world.

Physical buyers have paid record premiums for lead and zinc as smelter shutdowns open up gaps in Western supply chains.

Chinese exports have helped fill part of the gap and are expected to continue to do so until acute regional imbalances are resolved.

Net trade in refined lead from China


The transfer from the Eastern surplus to the Western deficit began first in the lead market.

China’s exports of refined lead started to pick up in the third quarter of 2021 after two years of subdued trade activity.

China shipped 95,000 tons to the rest of the world last year and it has exported an additional 88,000 tons so far this year, including 15,000 tons to Turkey in January and 30,000 tons to the United States in June.

European and US markets have been characterized by extreme physical stress for many months.

London Metal Exchange (LME) stocks remain low at 39,550 tonnes. The European sites hold only 2,525 tonnes and the American sites zero.

Lead stocks on the Shanghai Futures Exchange, on the other hand, hit a record high of 205,898 tonnes in September last year. They have since fallen to 76,154 tonnes, with almost 180,000 tonnes of metal leaving for other markets in the months that followed.

The east-west imbalance may be less pronounced, but it’s still there and physical premiums remain stubbornly high, with Fastmarkets pricing the US Midwest premium for 99.9% pure metal at $480 a ton above the LME spot price.

Last month’s large export delivery should bring some relief to North American buyers.

European buyers, meanwhile, will welcome the return after nearly a year of shutdown due to flooding at the Stolberg foundry in Germany.

Trading house Trafigura, which is in the process of buying the plant, said the restoration program for the 155,000 tonnes per year plant will be completed in the current quarter. Read more

However, it will take time for the supply chain to recover and for demand from the replacement battery sector to be relatively recession-proof, meaning reduced impact from the manufacturing slowdown that is putting pressure on other industrial metals.

The West seems to need a bit more of China’s surplus in the coming months.

Net trade in refined zinc from China


Chinese zinc exports were less dramatic at 60,000 tonnes in the first six months of 2022, but the reversal from previous trade patterns is more pronounced.

Since the imposition of the 15% export duty in 2008, the country has been a consistent net importer of refined zinc, with the annual tally standing between 400,000 and 700,000 tonnes over the past decade.

Imports have collapsed 82% to just 49,000 tonnes so far this year as the trade-off swung in favor of exports to a metal-starved Western supply chain.

Italy’s Portovesme smelter has been idle since late last year, and other European smelters are adjusting operating rates as they deal with soaring electricity costs.

North American supply, meanwhile, was squeezed by lower output from CEZinc’s Canadian refinery, as the company posted its second production drop in as many quarters due to a labor shortage. work and operational issues.

It now expects to produce 225,000 to 240,000 tonnes this year, down from an initial forecast of 270,000 to 280,000.

The LME’s live stocks are bombarded at 26,400 tons, resulting in a lingering strain over time. The three-month zinc cash premium closed Wednesday at $94 a tonne.

According to Fastmarkets, European physical premiums are holding their highs either side of the $500 per tonne mark, even as spot business cools off over the summer period.

Chinese exports included a shipment of 10,000 tonnes to Turkey in January, attesting to regional tightness.

However, most of what left China only arrived in Taiwan, which is apparently the only LME warehouse to have seen consistent and justified inflows in recent months.

The east-west rebalancing of the global zinc market this year has so far been less about the direct impact of Chinese exports than about the diversion of metal that would otherwise have gone to the world’s largest user.

China still appears to be well supplied with zinc, with stocks on the Shanghai Stock Exchange standing at 101,190 tonnes last Friday.

Local demand has been dented by a weak construction sector, which uses zinc in the form of galvanized steel.

Utilization is expected to pick up as we approach a seasonal peak for construction activity, but weak housing market signals and the potential for more COVID-19 lockdowns could dampen the upside.

The West’s supply problems, on the other hand, show no signs of being resolved until Europe’s energy crisis subsides, which no one seems to be expecting anytime soon. .

China’s refined zinc trade could end up being a tug of war between a recovering domestic market and continued appeal for the metal from Europe.

The opinions expressed here are those of the author, columnist for Reuters.

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Editing by Jan Harvey

Our standards: The Thomson Reuters Trust Principles.

The opinions expressed are those of the author. They do not reflect the views of Reuters News, which is committed to integrity, independence and non-partisanship by principles of trust.


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