TOKYO – Japan's biggest zinc smelter, Mitsui Mining and Smelting, has slashed its annual premiums to overseas buyers for 2015 by around 10%, marking the first cut in six years as rising exports by top user China spill into the region.
Premiums are a surcharge paid to producers on top of futures prices to obtain metal.
"Overall premiums for zinc for overseas buyers, mainly Southeast Asian buyers, for this year have been settled at about 10% lower than last year," said Sumikazu Ogata, investor and public relations manager at Mitsui Mining.
He added that the step had been driven by growing exports from China in the wake of a metals financing scandal in the port of Qingdao.
"We think China stepped up exports as some companies wanted to cash their inventories after the Qingdao problem," he said on Monday.
Last year's Qingdao metals financing scandal has squeezed access to credit for metals players in the region as banks have tightened lending terms, which sent zinc premiums to two-year lows in December.
Mitsui Mining, which plans to produce 223 000 t of zinc in the year ending March 31, typically holds talks on annual premiums which are added to the cost of London Metal Exchange (LME) cash prices and include shipping and insurance costs.
This year's discussions with overseas buyers are nearly finished, Ogata said.
He did not give specific premium levels for this year, but two traders quoted Japanese producer zinc premiums for 2015 at $170/t to $185/t on a cost insurance and freight (CIF) basis, depending on the Asian port.
China, the world's biggest zinc consumer and a net importer of zinc, has exported 131 369 t of zinc in 2014, up from 3 406 t in 2013, according to the country's customs data.