Summer heat may delay some US zinc shipped by rail: producers

Washington (Platts)--13Jul2012/541 pm EDT/2141 GMT


As the US zinc market enters the height of its summer business lull, zinc producers warned this week that the season's sizzling heat may delay zinc orders shipped by rail.

A zinc producer said the intense summer heat in the past couple of weeks could push back shipments of special high-grade zinc going by rail by roughly five days, as trains have to limit some of their operations to the cooler evening hours and/or limit their speed to avoid the wheel/rail friction that can spark fires in hot temperatures. The impact hasn't hit SHG shipments yet, he said, but added, "That's going to happen."

Meanwhile, the producer said he sold spot SHG at premiums of 7-7.5 cents in the past two weeks.

"I would say things are pretty strong," he said, despite the typical summer slowdown. The "best number" for SHG, he said, remains at 7 cents, with "occasional" deals up to 9 cents for small-volume buyers.

He added, however, that customer buying for 2013 annual supply contracts has dropped off, and that even the deals made for next year have represented a small portion of customer requirements.

Producers have recently said that 2013 deals have been going at 8 cents and beyond, but buyers have remained skeptical of those levels, citing weak demand.

"We've gotten [SHG] quotes from guys that want to entice you to buy something," an alloyer said. "Most of them are trying to get 7.5, but then they come to you and tell you they've got a really good deal for you at 7." However, he added, "July's a month when we normally don't have to buy extra metal."

The alloyer confirmed the higher quotes for 2013.

"The only numbers I've heard for next year are probably more like 8, but we haven't received any firm numbers," he said.

A zinc trader, who had been quoting SHG at 7 cents, said he has recently been offering the material at roughly 7.5 cents, noting that he thinks SHG premiums are being pressured higher, but not by demand.

"It's more the warehouse situation," he said, "where the warehouses are drawing in all available material."

In the Alloy No. 3 market, an alloyer estimated his company sold roughly 45 truckloads of the alloy in June at premiums of 16 to 19 cents. He said about half of the sales represented standard net-30 day payment terms -- up to 60 days -- and that terms close to the maximum 60 days might bump the premium up by about a penny.

He also said freight costs -- which he said might add 2 cents to the premiums -- were also a factor in the June premiums falling at the high end of the range. However, the alloyer said his company, like many others, is in the midst of the summer slowdown.

"It's very, very slow; we haven't seen hardly anything this week," he said, adding he would quote spot material this week at 17 cents. Another alloyer said he didn't have any spot transactions this week, but would quote spot material at 17-17.5 cents.

The Platts assessment for SHG this week was steady at 7.25 cents/lb plus LME cash, while the assessment for Alloy No. 3 was firm at at 17.25 cents plus LME cash.

--Laura Gilcrest, laura_gilcrest@platts.com --Edited by Jason Lindquist, jason_lindquist@platts.com

 

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