December 04, 2008

Zinc falls to 20 month low on speculations of rebate ending by China

It is reported that Zinc fell to a 20 month low as shipments from China, the world's largest producer, accelerated on speculation the government will end a tax rebate on exports. Copper and lead also dropped.

Mr Michael Jansen an analyst at JPMorgan Securities Ltd in London said that China may remove a 5% rebate on zinc exports next year. He said holders of stockpiled zinc may have sought to liquidate' before the change. Exports from China jumped 21% in the first 10 months of this year sending zinc prices down 44%.

Mr Robin Bhar a metals analyst at UBS AG in London said in an interview “There's probably an oversupply and people are in a rush to export.''

Mr Gayle Berry an analyst at Barclays Capital said in a report that “Chinese market participants are concerned that a possible 5% to10% tax on special high-grade zinc exports from January will lead to substantial oversupply in the domestic market.”

Zinc for delivery in three months fell USD 170 or 6.7% to USD 2,355 a metric tonnes on the London Metal Exchange after earlier reaching USD 2,270, the lowest since March 14th 2006. The price has dropped 49% since reaching a record high of USD 4,580 on November 10th 2006.

Zinc for January delivery on the Shanghai Futures Exchange dropped as much as the exchange imposed limit of 6% recently. The metal, used to galvanize steel has declined 42% this year in London, more than other metals traded on the LME.