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Glencore Stores Zinc in New Orleans, Creates Higher Premiums
May. 16, 2012 11:27AM PST
Base Metals Investing
Reuters reported that Glencore International (LSE:GLEN) is using warehouses monitored by the London Metal Exchange to store zinc in New Orleans, an action that is forcing industrial zinc buyers to pay high premiums despite the fact that the metal is in surplus.
Reuters reported that Glencore International (LSE:GLEN) is using warehouses monitored by the London Metal Exchange to store zinc in New Orleans, an action that is forcing industrial zinc buyers to pay high premiums despite the fact that the metal is in surplus.
As quoted in the market news:
‘Glencore has always controlled zinc in Europe. They don’t want a surplus there, they want higher premiums, so they’re shipping all the surplus from Asturiana de Zinc (in Spain) to New Orleans, where no one wants it,’ said a London-based source.
The LME is set up as a market of last resort, meaning there is always a buyer for every seller. In other words, when the zinc arrives in New Orleans, Glencore as the owner of the metal always has the option to sell it.
The crux is that this type of selling, in zinc at least, leaves market balances tight and premiums high, as market players are loathe to pay to ship metal from New Orleans to a more convenient location.