Column: China’s sale of state zinc reserves is a well-timed trade

Column: China’s sale of state zinc reserves is a well-timed trade

June 24, 2021

By Andy Home

LONDON (Reuters) – The inclusion of zinc in China’s sales of state metal reserves is testament to the market’s continued surprising strength.

London Metal Exchange (LME) three-month zinc hit a near three-year high of $3,108.50 per tonne last month and is currently trading around $2,900.

The Shanghai Futures Exchange (ShFE) zinc contract has out-performed London, last month hitting its highest level since 2007.

There is no evidence of the speculative excess the Chinese authorities have targeted in other over-heating commodities such as iron ore.

ShFE zinc volumes shrank in both 2019 and 2020 and have risen only marginally this year. Market open interest hit a six-year low at the end of February. It has partially recovered but was still 24% down on last year at the end of May.

The lack of investor interest derives from a less-than-exciting narrative of a market inexorably moving into over-supply after the price spike of 2018.

Yet zinc has stubbornly declined to perform to script, particularly in China.

The largely unexpected price resilience is proving a boon for Western producers. It may prove to be highly propitious for China’s state stockpile managers.


Zinc isn’t classified as a strategic metal in China and the state’s reserves have to some extent been accidental.

Low prices in 2009 and again in 2012 saw what was then the State Reserves Bureau (SRB) coming to the rescue of local producers by buying up surplus metal.

Tonnage and pricing were fully disclosed because the government wanted to send a price signal. As was also the case when the SRB sold 50,000 tonnes back to a resurgent market in 2010.

Net purchases over the 2008-2013 period amounted to 354,000 tonnes, which is what the market assumes is the volume of zinc held by what is now The National Food and Strategic Reserves Administration (NFSRA).

The NFSRA is tendering for the sale of 30,000 tonnes of zinc in July with the potential for more monthly sales if required. The auction is only open to industrial users.

It’s a neat way of combining limited firepower with maximum price signalling power as the government tries to dampen the inflationary heat.


It is also intended to alleviate short-term tightness in the Chinese supply chain caused by power rationing in Yunnan province.

The hydro-rich province, which accounts for around 12.5% of the country’s refined zinc production, is currently suffering from drought. All large power users, including zinc and aluminium producers, have been forced to reduce operating rates.

This supply constraint has coincided with a period of super-strong demand growth as Chinese manufacturing rebounds from the pandemic, led by the steel sector, a big zinc user for galvanised sheet.

The resulting tensions in the Chinese market-place have been the primary driver of higher zinc prices, both in Shanghai and in London.

China is the world’s largest processor of mined concentrates into zinc metal and its supply woes – a lack of raw material due to COVID-19 lockdowns last year and the current operating cap in Yunnan – have coloured the global picture.

World mine supply surged by 11.3% in the first four months of this year as the disruption caused by lockdowns in key producer countries such as Peru fades.

Yet global refined metal production grew by only 4.5%, according to the International Lead and Zinc Study Group.

It estimates the zinc market recorded a supply-demand surplus of just 31,000 tonnes in January-April, compared with a surplus of 256,000 tonnes in the same period last year and an April forecast for a 353,000-tonne surplus this year.

The tighter-than-expected market is all down to the bottle-neck in China’s processing sector. The country’s refined metal production slid by 8.2% in May relative to April due to the power curtailments in Yunnan.


Yunnan’s rainy season normally starts around now, which should feed through to normalised operations at zinc smelters over the next couple of months.

At which point analysts at Macquarie Bank expect zinc to “drift back towards balance” amid both concentrates and refined metal surpluses. The bank forecasts the zinc price to fall from an average $2,720 per tonne this year to $2,300 next year. (“Commodities Compendium,” June 17, 2021)

Fitch Solution analysts are still gloomier, expecting “a steady downtrend in prices out to 2030”, largely driven by slowing steel production in China. (“Zinc: Price Downtrend To Be Less Steep Than Previously Anticipated,” June 18, 2021)

The country’s steel production growth is expected to brake sharply from 7.8% in 2018-2022 to 1.3% over the subsequent five years. The flow-through drop in zinc demand for galvanising will transform China into a consistent net exporter, adding to global oversupply, Fitch warns.

The country hasn’t been a net exporter since 2007 and imports have been running just north of 500,000 tonnes in each of the last two years.

That’s because the domestic market was in persistent supply deficit to the tune of 292,000 tonnes annually in 2016-2020, according to Fitch. That deficit market is expected to flip to an annual average surplus of 196,000 tonnes over 2026-2030.


Given such gloomy forecasts, it’s no surprise that some are striking while the market is still hot.

Australia’s New Century Resources has just announced it has hedged forwards around 25% of its planned mine production – equivalent to around 90,000 tonnes payable zinc – out to June 2024.

The transaction with Macquarie Bank locks in a weighted average price of A$3,717 per tonne (or US$2,900 per tonne). “The zinc price has never averaged above the company’s achieved hedge price for a three-year duration,” New Century noted.

China’s stockpile managers find themselves in the same fortuitous position, releasing metal into what just about every analyst thinks will be zinc’s last bull hurrah.

The SRB bought its zinc in 2008-2009 at prices under 12,000 yuan per tonne. The Shanghai price has slipped from its May highs but remains at a lofty 21,105 yuan.

Selling state reserves right now looks a very good zinc trade, whatever the broader political motivation to tame commodity price inflation.

Particularly if the metal will plug the last remaining hole in a refilling supply chain.

($1 = 6.4778 Chinese yuan)

(Editing by David Evans)

Incoming euro zone data ‘very strong’, ECB’s Schnabel says

Incoming euro zone data ‘very strong’, ECB’s Schnabel says

June 24, 2021

FRANKFURT (Reuters) – The euro zone economy is now growing rapidly and incoming economic indicators point to strong recovery, European Central Bank board member Isabel Schnabel said on Thursday.

“It’s fair to say that now we are actually at a turning point,” Schnabel, the head of the ECB’s market operations, told an online lecture.

“If you look at any of the indicators that are coming in, like the PMIs or other confidence indicators, you see that they are all very strong, very optimistic, and they point towards a strong recovery this year,” Schnabel said.

(Reporting by Balazs Koranyi; Editing by Mark Heinrich)

Prince Philip’s life celebrated with new Windsor Castle exhibit

Prince Philip’s life celebrated with new Windsor Castle exhibit

June 24, 2021

LONDON (Reuters) – A new exhibition opening in Windsor Castle on Thursday commemorates the life and legacy of Britain’s Prince Philip, including many fabulous items gifted him over decades of official duties and overseas visits.

Titled ‘Prince Philip: A Celebration’, the display features over 100 objects from the Duke of Edinburgh’s life.

Philip, the husband of Queen Elizabeth and a leading figure in the British royal family for almost seven decades, died on April 9, aged 99.

The exhibition had been planned as part of the 100th birthday celebrations for Philip, who would have turned 100 on June 10, curator Sally Goodsir told Reuters. “But following his death in April, we have delayed its opening just by a couple of weeks and are still holding it,” she said.

    Philip was aware of the exhibition and its contents, Goodsir said.

    Among the highlights of the display are the coronation robes and coronet worn by Philip to the 1953 coronation of Queen Elizabeth, and his chair of estate which normally stands beside the queen’s at Buckingham Palace and is displayed at Windsor Castle for the first time.

    Going on public display for the first time is a portrait of the prince painted in 2017, the year of his retirement. The painting by Ralph Heimans features Philip wearing the blue and red Windsor uniform, standing in the Grand Corridor at Windsor Castle.

    The items range from the personal – such as Queen Victoria’s journal recording the birth of Prince Philip’s mother, Princess Alice, at Windsor Castle in 1885, to the eccentric – a human-sized grasshopper wine cooler presented by former French President Georges Pompidou during his visit to the UK in 1972.

    Other items include: a Faberge frame with photographs of King George VI and Queen Elizabeth that was a wedding gift; a chess set presented by Nelson Mandela during his 1996 visit to the UK; and a pair of cowboy boots with the words Prince and Philip inscribed in gold, gifted to the prince during a visit to Houston, Texas, in 1991.

Above the boots, the exhibit displays a First Nations feather headdress, a 1973 gift from the Head Chief of the Blood Reserve, Jim Shot Both Sides.

Also on show are the remains of Windsor Castle’s St George’s Hall clock and a fragment of a burnt beam, salvaged by Philip from the debris following a fire that swept through the castle in 1992.

    “I think without people being able to gather for the funeral, as they might ordinarily have done, I hope they might be able to come to the castle and learn a little bit more about him,” said Goodsir.

    The exhibition will be open to the public until Sept. 20.

(Reporting by Hanna Rantala, Editing by Rosalba O’Brien)

Gibraltar votes in referendum on easing strict abortion law

June 24, 2021

By Jon Nazca and Marco Trujillo

GIBRALTAR (Reuters) – Gibraltarians voted in a referendum on Thursday on whether the tiny British territory on the southern tip of Spain should ease one of the strictest abortion laws in Europe.

Its criminal law bans abortion in all circumstances, with a maximum punishment in theory of life in prison. While no one has been convicted, citizens and residents are forced to go to Spain or travel to Britain to have an abortion.

“I think we should be able to have an abortion here, we shouldn’t have to go to a different country just to have an abortion,” 20-year-old student Geraldine told Reuters after casting her vote.

“At the end of the day it is our body, our choice. Other people shouldn’t make the choice for us,” added the student, one of 23,000 Gibraltarians eligible to vote.

The referendum had originally been scheduled for March 2020, but was postponed because of the coronavirus pandemic.

Although penalties are tough, not a single woman or doctor has ever been convicted under the law, a Gibraltar government spokeswoman said.

The referendum is on an amendment to the criminal law that would allow pregnancies to be terminated by a registered physician within the first 12 weeks in cases where the pregnancy carried more risk to the mother’s health than termination.

Abortions would be permitted at a later stage under a narrow set of circumstances.

Even if the changes are approved, the law would be far more restrictive than in most of the rest of Europe.

Pro-life groups say that the wording of the law could be interpreted in a way that would ultimately allow most abortions.

“I’m supporting ‘No’ because I believe life begins at conception and life is sacred and it should be respected until the moment of death,” Susan Gomez, 52, who is a member of the Gibraltar pro-life movement, told Reuters.

“We should give (women who are pregnant) all the support in the world so that abortion never happens”, she said.

Both the government, which has backed the proposed changes, and opposition parties in the enclave encouraged people to vote.

“The government will act in keeping with the views of the people of Gibraltar as expressed … whichever of the two results may come out,” Fabian Picardo, Gibraltar’s chief minister, said.

(Reporting by Jon Nazca and Marco Trujillo in Gibraltar. Writing by Emma Pinedo in Madrid)

Lasers and flaming torches light up battle over new Israeli settlement

Lasers and flaming torches light up battle over new Israeli settlement

June 24, 2021

By Ali Sawafta and Rami Ayyub

BEITA, West Bank (Reuters) – In a fusion of the modern and the medieval, green laser beams and flaming torches light up the night sky in a remote part of the Israeli-occupied West Bank, as Palestinians wage a battle to stop a new Jewish settlement.

The “Night Disruption” protests south of Nablus are aimed at halting the rapid growth of a settler outpost that began in early May and is now home to 53 Israeli families on what the Palestinians say is their land.

Israeli troops have shot dead five Palestinians during stone-throwing protests since Givat Eviatar was set up, Palestinian officials said. The Israeli military did not comment on fatalities, but said troops used live fire only as a last resort.

The army has deployed soldiers during the night-time demonstrations, as well as at Friday protests in the nearby village of Beita which have lasted several months.

During the night protests that began last week, burning tyres have engulfed settler homes in acrid smoke.

“We come at night, we light up the mountain, to send them a message that they can’t have even an inch of this land,” said one masked Palestinian this week. He lit fires while others flashed laser pointers to dazzle the settlers in their homes.

The Israeli military said it faced “hundreds of Palestinians throwing stones, lighting fires, burning tires and throwing explosives” at its troops.

“The large number of violent rioters endangers the lives of Israeli civilians and a military force has been deployed to provide protection,” it said in a statement.

Protests against an Israeli settlement in East Jerusalem’s Sheikh Jarrah neighbourhood were one factor behind 11 days of hostilities between Israel and Gaza militants in May in which over 250 Palestinians and 13 in Israel were killed.


The settlers named the outpost after Eviatar Borovsky, an Israeli stabbed to death in 2013 by a Palestinian at a nearby road junction. The outpost has been built up and evacuated three times since then.

But it was set up without government authorisation – which makes it illegal under Israeli law – and presents an early test for new Israeli Prime Minister Naftali Bennett.

Bennett was once a senior leader of the settler movement and heads a far-right religious party.

But he sits precariously atop a new coalition that spans the political spectrum from far-right to far-left, making sensitive policy decisions on the Israeli-Palestinian difficult.

The Israeli military issued an order to evacuate the outpost on June 6. But that was under Bennett’s predecessor Benjamin Netanyahu, whom Bennett replaced on June 13.

The evacuation order has since been postponed, the Israeli military said, and Bennett has not said if he plans to implement it.

A spokesman for Bennett’s office declined comment, but the settlers are intent on staying on what they call “Eviatar’s Hill” and Palestinians call “Jabal Al-Sabih” or “The Morning Mountain”, because the sunlight strikes it early.

“They won’t drive us away from here. This is our homeland, this is our forefathers’ land. We love the land, we want to be here, we know they come out of hate,” said Eli Shapira, a 30-year-old teacher and father of four.

As construction proceeds, some settler families live in caravans. Some roads are already paved, and others are lined with electricity cables.


More than 440,000 Israeli settlers live uneasily among some 3 million Palestinians in the West Bank, land that Israel captured and occupied in a 1967 war but which Palestinians say is the heartland of a future state.

The Palestinians and most countries view Israel’s settlements as illegal under international law. Israel disputes this, citing historical and biblical links to the land and its own security needs.

Palestinian officials say the new outpost would help create an unbroken east-west line of Israeli settlements through the northern West Bank, cutting the territory in half and rendering Palestinian statehood unviable.

The site lies 30 km inside the West Bank in fertile olive and grape-growing territory for Palestinians around Nablus.

Nearby there are many hilltop Jewish settlements, whose residents want to extend their territory.

“Israel is a strong country and not only will we not be weakened, not only will terrorism not scare us or make us flee from our homeland – we will build more and more,” said Yossi Dagan, head of the Shomron Regional Council representing settlements in the area.

On Sunday Israel’s military rejected an appeal by the settlers against evacuation, saying the outpost “undermined security stability” in the area.

The settlers have until Monday to appeal to the Supreme Court, a military spokesman said, although the decision over the evacuation ultimately rests with Bennett.

Moussa Hamayel, Beita’s deputy mayor, said they had heard reports that the outpost might be dismantled. But he was sceptical.

“We don’t trust their promises, not until we see (the outpost) completely empty,” he said.

(Additional reporting by Rami Amichay; Writing by Rami Ayyub; Editing by Stephen Farrell and Mike Collett-White)

U.S. ambassador returns to Moscow after leaving amid crisis in ties

U.S. ambassador returns to Moscow after leaving amid crisis in ties

June 24, 2021

MOSCOW (Reuters) – U.S. Ambassador to Russia John Sullivan returned to Moscow on Thursday after leaving the country in April amid a diplomatic crisis, as relations improve slightly in the wake of last week’s leaders’ summit.

U.S. President Joe Biden and Russian President Vladimir Putin met on June 16 for talks that both leaders described as pragmatic, but not friendly. Political ties are badly strained.

“Arrived back in Moscow today,” Sullivan said, in a comment shared on Twitter by the U.S. Embassy spokesperson. “Ready to work with… Russia on our goal of a stable and predictable relationship between our countries.”

The envoy said the two powers should be “open and frank” with each other on issues where they disagree, in earlier comments to the Interfax news agency.

“We should cooperate where it is in our mutual interest, and where we have disagreements – and we have significant disagreements – it is important to have an open and frank dialogue,” Interfax cited Sullivan as saying.

Sullivan left Moscow in April, saying he was travelling to Washington for consultations, four days after the Kremlin suggested that the United States recall him amid a diplomatic crisis between the two countries.

Russia had previously recalled its own ambassador to Washington after Biden said he thought Putin was a “killer”, and the two countries imposed sanctions on each other.

Russia’s ambassador to the United States, Anatoly Antonov, flew back to Washington earlier this week.

(Writing by Polina Ivanova and Tom Balmforth; Editing by Alistair Bell)