December 04, 2008

SHFE to raise zinc daily movement limit and margins

Interfax-China reported that the Shanghai Futures Exchange will lift the daily movement limit of some zinc contracts from 6% to 13% and increase contract margins from 9% to 14%.

Shanghai Futures Exchange zinc contracts for delivery in January and February 2008 have fallen by their daily limit for the last three consecutive trading days recently and trading was finally suspended today. As a result, the daily movement limits of the two contracts will be lifted to 13% and the trading margin increased to 14% as required by SHFE zinc contract trading rules. Meanwhile, zinc contracts for delivery in March, April, May and July all fell by their 6% daily movement limit recently.

The benchmark January 2008 zinc contract plunged to a new low yesterday to settle at CNY 18,205 per tonne down 37% since its SHFE debut on March 26th 2007 while the benchmark three month zinc price on the London Metal Exchange fell to USD 2,319.50 per tonne recently.

Mr Pang Ying an analyst from Shenzhen based Rongtop Trade Co Ltd., a futures and physical trading company said "Zinc oversupply is a major concern for the market, and the fundamentals show no sign of coming out in favor of price. Moreover, current price levels are dangerously close to the production costs of zinc smelters.

However, relatively high zinc concentrate treatment charges supplied by international miners are enabling most domestic zinc smelters to maintain normal production levels.

China produced 341,900 tonnes of refined zinc in October 2007 up by 5.26% from the previous month, while the country produced 3.04 million tonnes of refined zinc in the first 10 months of this year, up 19.1%YoY.