Singapore 25/08/2016 - Chinese imports of refined zinc slumped 51.1 percent year-on-year to 16,817 tonnes in July, according to latest data from the Chinese customs. The July figure was also nearly half of the June total.
Imports in the first half of 2016 totalled 308,709 tonnes, up 33.1 percent on the same period last year.
The decline in metal imports is not surprising given that that the import arbitrage window had mostly remained closed since late in January, market participants said.
"A more bearish interpretation of the data could be that the tightness in ore has yet to translate to tightness in the metal market yet," a Shanghai-based zinc analyst said.
Monthly imports had hovered around 30,000-40,000 tonnes since April, down from an average of around 60,000 tonnes per month in the first quarter.
April this year marked the first year-on-year decline in imports since September last year; they rose on a year-on-year basis over that period due to arbitrage opportunities and tighter supply in the domestic market while Chinese smelters limited sales amid falling zinc prices.
Chinese zinc ore and concentrate imports were down 45.3 percent year-on-year but rose 76.4 percent month-on-month to 164,791 tonnes in July, taking year-to-date imports to 1.16 million tonnes. This was down 32.4 percent on the same period last year.
Australia was the source of most of the month-on-month increase in imports, with Peru, Morocco, Russia, Bolivia and Mongolia also lifting exports to China in the month.
Market participants claimed to be baffled by the increase given that it remains a loss-making exercise for Chinese smelters to import concentrates at current treatment charges (TCs).
Some suggested the higher imports could be due to smelters importing mixed lead-zinc oxide concentrates that have higher TCs than normal zinc concentrates due to its more complicated separation process.
"It could also reflect tightening domestic ore supply and falling domestic TCs," a Shanghai-based trader said.
Since December, growth in monthly imports has been flat or negative year-on-year while Chinese smelters choose not to take delivery of overseas concentrate due to low overseas TCs. Chinese smelters have instead supplemented their raw material supply via the domestic market, which is much cheaper although the material is of poorer quality.
Domestic zinc ore supply is tightening as a result, with domestic TCs heard around 4,700-5,000 yuan per tonne early in August on a delivered basis inclusive of VAT compared with 5,000-5,200 yuan a month ago.
But judging from the year-on-year declines in zinc metal and concentrate imports, the shortage of imported concentrates and the decline in refined metal imports should continue, which will result in better balance of supply-demand for the refined tin market overall, China’s Galaxy Futures said in a report on Thursday.
(Additional reporting by Vicky Chen, editing by Mark Shaw)