Mitsui Mining Boosts Zinc Fee 70% as China’s Consumption Rises

Feb 05, 2014 12:52 am ET

Feb. 5 (Bloomberg) -- Mitsui Mining & Smelting Co., Japan’s biggest zinc producer, raised annual charges to overseas buyers by as much as 70 percent as consumption increases in China.

That compares with a 15 percent gain for special high-grade zinc last year, said Osamu Saito, a general manager in the Tokyo-based company’s business department. He declined to disclose the dollar value of the fees.

Zinc stockpiles monitored by the London Metal Exchange shrank 31 percent since the start of 2013, with inventories in Asia contracting 68 percent. Morgan Stanley forecasts cash prices to average $2,127 a metric ton in 2014, a 10 percent increase on last year as the zinc deficit widens sixfold.

Exports from Japan and South Korea declined last year and will fall again over the next 12 months while Chinese imports remain high, Saito said in an interview yesterday. Belgium and the Netherlands joined Spain among the top 10 suppliers to China last year, indicating higher Asian premiums were enough to cover shipping costs from Europe, Saito said.

China is the biggest consumer of industrial metals including zinc, which is used to rust-proof steel.

Futures lost 10 percent in the past year, the smallest drop among six base metals on the LME, and closed at $1,952 a ton yesterday. The charges by Mitsui Mining are added to the cost of the metal for immediate delivery on the LME, and include shipping and insurance costs.

The zinc deficit will widen to 120,000 tons this year from from 20,000 tons in 2013, Morgan Stanley said in a report on Jan. 22. It will increase to 180,000 tons in 2015, the bank estimates.

China’s Imports

China’s imports of refined zinc rose 22 percent to 624,165 tons in 2013 after jumping 48 percent in 2012, according to customs data.

The premium suppliers charge buyers in Shanghai for immediate delivery of the metal rose 38 percent to $172.5 a ton in February from a year earlier, according to data from Metal Bulletin.

South Korea’s exports of the metal with a minimum purity of 99.99 percent dropped 6.8 percent to 329,501 tons in 2013 from a year ago, data from the Korea International Trade Association show. The country is the second-biggest producer after China.

Japan’s total zinc exports fell 15 percent to 115,393 tons in 2013 from a year earlier, trade data from the finance ministry show. Major overseas markets include China, Taiwan and Southeast Asian nations.

Inventories in LME-monitored warehouses shrank to 845,425 tons on Feb. 4, the lowest since February 2012, exchange data show. Of the total, stockpiles held in Asia were 30,725 tons, or 3.6 percent, according to the data.

--Editors: Jarrett Banks, Brett Miller