Copper, Zinc Jump on Bets Skid in Industrial Metals Was Overdone

Japan will join China in boosting zinc exports as domestic demand weakens, worsening a global
glut, according to the top Japanese producer of the metal.
Shipments from Japan may rise 24 percent to more than 100,000 metric tons this year, the highest
since 2013, Osamu Saito, general manager of Tokyo-based Mitsui Mining & Smelting Co.’s metals
sales group, said in an interview Wednesday. Domestic demand may shrink to a six-year low, he
said.
Rising exports from Japan will join record shipments from China to deepen a global oversupply.
The world zinc market is flipping into surplus for the first time in three years, with production
forecast to exceed consumption by about 200,000 tons, according to Saito. Futures on the London
Metal Exchange are down about 7 percent this year as cooling Chinese demand outweighed mine
closures elsewhere.
“Competition among exporters is getting more intense,” Saito said. “Abundant supply in Asia is
putting downward pressure on premiums in the region.”
Spot premiums in Asia, or the fees producers charge buyers on top of LME cash prices, have
dropped by $30 a ton so far in 2015, Saito said. The company earlier this year cut the surcharge in
its annual contracts for the first time since 2009, trimming it by 10 percent. Premiums in Singapore
have fallen $37.08 a ton, or 33 percent, so far this year to $76.25 as of Thursday, according to Metal
Bulletin Ltd.
Global production of refined zinc outpaced consumption by 181,000 tons in the first four months of
the year, compared with a deficit of 119,000 tons the same period last year, according to
International Lead and Zinc Study Group data.
Shrinking Demand
Japan’s demand for the metal, used to make steel automobile parts and brass plumbing fixtures, may
shrink 4 percent this year to 480,000 tons as carmakers cut output, Saito said. The nation exported
82,206 tons of zinc last year, according to Ministry of Finance data.
Japan’s vehicle production fell every month this year, with May output 17 percent lower from a year
earlier, according to the Japan Automobile Manufacturers Association. The country’s construction
orders slid for a second month in May.
Mitsui has no plans to cut output because the weakening Japanese currency improves earnings in
yen terms as it receives smelting fees and sells products overseas in dollars. The yen has lost more
than 17 percent against the greenback in the last 12 months, the worst performer among 12 major
peers in Asia.
China exported 59,660 tons of refined zinc from January to May, surging from about 1,000 tons
over the same period last year, according to Chinese customs data. Output rose 13 percent in the
first five months of this year to 2.5 million tons after reaching a record 5.8 million in 2014,
government data showed.
Zinc for delivery in three months on the LME rose 0.3 percent to $2,028 a ton by 1:39 p.m. in
Tokyo. It has fallen 16 percent since hitting a nine-month high in May.

Source:http://www.bloomberg.com/news/articles/2015-07-02/japan-joins-china-szinc-
export-boom-to-deepen-global-oversupply