By Pratima Desai and Lewis Jackson
LONDON/BEIJING (Reuters) -Commodity trader Trafigura is taking large amounts of zinc stored in London Metal Exchange approved warehouses in Singapore and shipping some of it to the United States, five sources familiar with the matter said.
It is not known exactly how much zinc Trafigura has already taken delivery of, or plans to take from LME warehouses in Singapore, or why the Swiss-based trader was taking it to the United States.
However, worries about supplies on the LME market have helped push benchmark zinc prices 5% higher so far this month to around $2,850 a metric ton while its discount against the cash contract has narrowed to near zero.
Industry sources said Trafigura’s zinc shipments to the United States were likely to be used to meet subsidiary Nyrstar’s contractual obligations to U.S. customers when its Clarksville smelter closes for maintenance this year.
“There will be a planned – annual – maintenance shut at Nyrstar Clarksville for approximately 21 days from mid-October into November,” Nyrstar said in response to a request for comment.
Nyrstar confirmed Clarksville’s annual capacity is 125,000 metric tons of zinc metal a year, but declined to answer questions on whether it would import the metal it needs to supply customers.
Trafigura declined to comment.
Two of the sources said Trafigura was also using some of the zinc for “rent-deals” – in other words, lucrative agreements under which warehouses share rental income with firms that deliver metal to them for as long as it stays in storage.
Companies that deliver metal for rent deals do not have to retain ownership of the metal, but they still get a share of the rent, paid by the new owners, for as long as the metal stays in that particular warehouse.
Zinc stocks in LME warehouses as of August 12 totalled 78,475 metric tons of which most – 78,375 tons – was stored in Singapore where stocks of the metal have fallen by more than 30% since July 25.
Cancelled warrants – title documents conferring ownership – or metal marked for delivery show another 33,000 tons is due to leave LME warehouses in Singapore.
Two of the sources said Trafigura could be moving zinc to the U.S. in anticipation of tariffs on zinc imports once a trade investigation that started in April is concluded.
The investigation, which covers a range of minerals including zinc, is the same type as the one into copper. Traders and producers spent much of the year shipping copper to the U.S. in anticipation of the tariffs.
Zinc is on the U.S. critical mineral list as defined by U.S. Geological Survey.
(Reporting by Pratima Desai and Lewis Jackson; editing by Barbara Lewis)
