LONDON: Commodity trader Trafigura and other firms are moving to take large amounts of zinc out of London Metal Exchange approved warehouses in Asia, sources familiar with the matter said, fuelling concern about more problems at the exchange after chaotic nickel trading last month.
A Trafigura spokesperson in response to request for comment said “we don’t usually comment on commercial matters”.
The LME, the world’s biggest market for industrial metals, suspended nickel trading on March 8 and cancelled billions of dollars in trades after prices spiked by more than 50% in a matter of hours to a record above $100,000 a tonne.
Stocks of zinc, used to galvanise steel, in LME warehouses have fallen 40% since December to 127,675 tonnes.
This week, the proportion of zinc due to be leaving LME warehouses shot up to 65% from 26%, LME data showed.
An LME spokesperson said: “We note the current tightness in the zinc market and are monitoring all metals closely to ensure market activity remains orderly.” Rapid falls of metals in LME warehouses that underpin the exchange’s physically-deliverable futures contracts can result in price volatility.
“Some market participants fear that the zinc market could experience similar turmoil as the nickel market has,” Commerzbank analyst Daniel Briesemann said.
Traders said low liquidity on the 145-year-old exchange could also contribute to erratic price movements in zinc, which should be limited by the 15% daily price limits introduced by the LME after the nickel fiasco.