Trafigura takes zinc out of LME warehouses, with some destined for shipment to the US, sources report.

Zinc Shipments from Trafigura and Market Impacts

LONDON/BEIJING – Trafigura, a merchandise trader, is reportedly collecting significant amounts of zinc from a London Metal Exchange-approved warehouse situated in Singapore and sending portions of it to the United States, according to sources close to the matter.

The exact quantity of zinc already delivered from these warehouses remains unclear, as does the reason for its presence in the U.S. However, rising concerns regarding supply within the LME market have driven zinc prices up by 5% this month, bringing discounts on cash contracts almost to zero.

Sources in the industry suggest that Trafigura’s zinc exports to the U.S. are likely intended to help meet the contractual commitments of its subsidiary, Nyrstar, to customers in the U.S., especially during the planned maintenance shutdown of the Clarksville smelter later this year.

Nyrstar confirmed that the Clarksville facility is set to close for about 21 days between mid-October and November for its annual maintenance. They also noted that the annual production capacity of Clarksville is 125,000 metric tons of zinc, but declined to answer whether they would import zinc to fulfill customer demands during this closure.

Trafigura has chosen not to comment on this situation.

According to two sources, Trafigura is utilizing some of the zinc for “rent deals.” These arrangements allow the company to share rental income with metal supply firms while the zinc remains stored in the warehouse.

Interestingly, companies involved in these rental transactions do not need to hold ownership of the zinc; they can still benefit from rent paid by the new owner as long as the zinc stays in the designated warehouse.

As of August 12th, the total zinc stock at the LME warehouse was 78,475 metric tons, with a majority—78,375 metric tons—stored in Singapore. It’s worth noting that the metal stocks have dropped by over 30% since July 25th.

Additionally, cancelled warrants and metals marked for delivery are scheduled to leave the LME warehouse in Singapore.

Some sources indicate that Trafigura might be relocating zinc to the U.S. in preparation for potential tariffs on zinc imports, as a trade survey that began in April is set to conclude soon.

This survey encompasses a variety of minerals, zinc included, mirroring the type undertaken for copper. Many traders and producers have sent shipments to the U.S. throughout the year in anticipation of upcoming customs duties.