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EXCLUSIVE-Trafigura set to remove zinc from LME system, fueling concern -sources


Band Eric Onstad and Pratima Desai

LONDON, April 7 (Reuters)Commodities trader Trafigura and other companies are set to withdraw large quantities of zinc from London Metal Exchange-licensed warehouses in Asia, sources familiar with the matter said, fueling concern over other issues at hand. the stock market after chaotic nickel trading last month.

A Trafigura spokesperson in response to a request for comment said “we do not generally comment on commercial matters”.

The LME, the world’s largest industrial metals market, suspended nickel trading on March 8 and canceled billions of dollars in trades after prices soared more than 50% in hours to a record high above 100 000 dollars per ton.

Zinc stocks MZNSTX-TOTALused to galvanize steel, in LME warehouses has fallen 40% since December to 127,675 tonnes.

This week, the proportion of zinc due to leave LME warehouses rose from 26% to 65%, according to LME data.

An LME spokesperson said: “We note the current tightness of the zinc market and are closely monitoring all metals to ensure market activity remains orderly.”

The rapid drops in metals in the LME warehouses that underlie the exchange’s physically deliverable futures contracts can lead to price volatility.

“Some market participants are concerned that the zinc market will experience turbulence similar to that of the nickel market,” said Daniel Briesemann, an analyst at Commerzbank.

Traders said low liquidity on the 145-year-old exchange could also contribute to erratic zinc price movements, which are expected to be limited by the 15% daily price limits introduced by the LME after the nickel fiasco.

Trafigura transports metal from Asia to Europe to replace lost production at Nyrstar in Belgium NYR.BRin which it holds a majority stake, zinc market sources said.

Zinc is leaving the LME system due to significant shortages created by producers cutting production due to record high electricity prices. Zinc production is energy intensive.

The problem is particularly acute in Europe. Of the 500 tons of zinc stored in the LME warehouse in Europe, only 25 tons are available on the market.

Premiums for the physical metal in Europe soared due to cuts at zinc smelters, which also hit commodities trader and miner Glencore GLEN.L.

“It’s possible that some of this metal is being mined by people looking to take advantage of the bounty right now or by parties that have commitments and need the metal,” said Duncan Hobbs, research director at Concord. Resources.

The premium for high-quality specialty zinc in the Belgian port of Antwerp hit a record $460 a ton, up from $170 last October before the winter heating crisis hit, according to Fastmarkets.

Reference Zinc CMZN3 hit a record high of $4,896 a tonne last month on rising supply concerns.

Zinc stocks in warehouses at the Shanghai Futures Exchange have soared this year, but logistical problems mean it is not easy to rebalance the market.

“We also had these very high freight rates, especially container freight rates, which impeded the flow of metal from region to region,” Hobbs added.

LME zinc prices surgehttps://tmsnrt.rs/3NR4s1a

(Reporting by Eric Onstad and Pratima Desai; Editing by Veronica Brown and Alexandra Hudson)

(([email protected]; +44 20 7542 7093; Twitter https://twitter.com/ReutersEricO; Reuters email: [email protected]))

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