FORECAST: European zinc market sees small increase in annual premiums as backwardation weighs

Annual premiums for zinc in Europe are expected to largely stay flat or go up slightly next year, with the negative spreads on the London Metal Exchange and price rally exerting pressure, market sources told Metal Bulletin.

“I hope that the premium will go up but with such [a backwardation] in the market it’s very difficult – if you talk to a customer for next year they will all say they want a decrease on the premium,” a Europe-based trader said after annual contract negotiations kicked off a couple of weeks ago. Industry sources are forecasting a minimal increment of no more than $5 per tonne in the premium for annual contracts in 2018. In 2017, the bulk of European deals were settled at premiums of $130-140 per tonne on a duty-paid fca basis via Rotterdam, while delivered premiums in Italy for long-term contracts were around $190 per tonne, according to Metal Bulletin assessment. Zinc buyers have unanimously pointed to the current wide backwardation to justify the limited room for growth in the premiums, which are the logistical and financial costs...


Julian Luk

October 12, 2017

16:55 GMT