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Asia Metals-Korea Zinc offers spark China move

SINGAPORE: Korea Zinc Co Ltd is making aggressive zinc offers in Asia, forcing Chinese suppliers and Pasminco Ltd to fight back to protect their shares in Asia, traders said on Wednesday.

They said Korea Zinc, which has emerged as the world's biggest zinc producer after completion of its Townsville refinery, was offering low premiums as well as attractive shipping terms in order to expand its market share in Asia.

"They're selling aggressively," said a trader. "It's very low premiums. In any market they can get their hands on, they also offer very attractive shipping terms. I think they're using domestic carriers."

Traders said there was good zinc demand in the region, including in Southeast Asia where infrastructure investment may pick up and roofing demand was expected ahead of the rainy season.

In Beijing, the China Securities newspaper said on Wednesday the country would spend $750 billion on developing its infrastructure over the next three years.

End-users were still cautious about KZ products, particularly those from the new Townsville refinery in Australia that were not yet registered on the London Metal Exchange (LME).

Some said KZ had yet to prove a reliable supplier, and said South Korea continued to import low-priced zinc from China, while exporting higher grade KZ output.

STIFFER COMPETITION LOWERS PREMIUMS

But traders said the stiffer competition had already led to low premiums of $30-$35 per tonne, C&F, for registered special high grade Chinese zinc at a major Taiwan tender last week.

Traders in Taiwan, one of the major consumers in Asia but without a zinc smelter of its own, said last week spot premiums for Chinese zinc were quoted around $40 per tonne -- well below $80-$90 for other foreign brands.

"Chinese are fighting very hard for the business," said another trader. "Chinese smelters started high production again after a shutdown during the cold winter. Now they are trying to catch up with orders."

Some traders said a slowdown in Chinese zinc exports after the Lunar New Year in February was also due to a power shortage caused by low temperatures, in addition to an LME price decline to below $1,100 per tonne.

Traders said Pasminco, another top world producer of zinc, was also responding with aggressive offers as it seemed to have some surplus metal to offer in the spot market.

Other zinc producers in the region, such as those from Japan or Thailand, were no longer very active as they probably enjoyed a recovery in their own domestic market, they added.

Premiums in Singapore were little changed at $10-$18 per tonne.

In the aluminium market, Singapore premiums drifted lower in the absence of large buyers, with Indian ingots seen at $50/$55 per tonne and Good Western at $65/$70, traders said.

They also saw no major inquiries from China, which had been expected to raise imports in view of global shortage of alumina.-Reuters