Shanghai Zinc Falls Most in 10 Days as China Ends Export Rebate

By Glenys Sim and Iris Leung

Aug. 1 (Bloomberg) -- Zinc futures in Shanghai fell the most in two weeks after China, the world's largest producer and consumer of the metal, removed export rebates from today.

The government will end a 5 percent tax rebate on zinc with a minimum purity of 99.995 percent, the State Administration of Taxation said yesterday in a statement.

``Theoretically it's not good news for zinc prices in Shanghai as this will likely add to the ample supply in the market at the moment,'' said Wang Fei, an analyst at Maike Dickson Investment Management Co. in Shanghai.

Zinc for October delivery on the Shanghai Futures Exchange dropped by as much as 330 yuan, or 2.1 percent, to 15,250 yuan ($2,229) a metric ton, the most since July 16. The most-active contract traded at 15,310 yuan a ton, down 1.7 percent, at 10:14 a.m. in Singapore.

Zinc for delivery in three months on the London Metal Exchange dropped 0.6 percent to $1,890 a ton at 9:59 a.m. Singapore time, after jumping as much as 6.1 percent yesterday on the Chinese news.

Zinc inventories in Shanghai rose for a fourth week to 71,760 tons last week, 29 percent above levels at the start of the year. Stockpiles of zinc in London Metal Exchange warehouses rose to 157,325 tons yesterday, the highest since September 2006.

``On a more practical front, given the widening spread between London and Shanghai, it was already not profitable to export even with the rebates, so I don't think any price moves will be sustained,'' said Wang.

China Manufacturing

Shanghai copper and aluminum also declined on concern that demand will fall after manufacturing in China, the world's fourth- biggest economy, contracted for the first time since a survey of purchasing managers began in 2005.

Copper for delivery in October fell as much as 510 yuan, or 0.8 percent, to 61,260 yuan a ton on the Shanghai Futures Exchange, and stood at 61,370 yuan at 10:14 a.m. Singapore time. Shanghai October aluminum slipped 0.2 percent to 19,090 yuan at the same time.

Among other LME-traded metals, copper was 0.2 percent higher at $8,068 a ton, and aluminum dropped 0.3 percent to $2,970. Lead, nickel and tin had not traded as of 10:06 a.m. in Singapore.

To contact the reporters for this story: Glenys Sim in Singapore at gsim4@bloomberg.net; Iris Leung in Hong Kong at Ileung7@bloomberg.net