Washington (Platts)--9Nov2012/629 pm EST/2329 GMT

US zinc alloyers said they observed a marked business slowdown this week as the London Metals Exchange zinc price rose. LME three-months zinc closed at $1,890/mt Friday, up from $1,874/mt a week ago.

"The market moved up this week so I haven't sold anything; when the price was low we were getting more feelers," an alloyer said. He added that, if he did get any inquiries this week, "I'd look for 18 cents [plus LME cash]."

The alloyer was vague on how low a quote he might offer to secure an order in an increasingly competitive market, but noted, "It all depends on what you have your [raw material special high-grade zinc] bought at."

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The alloyer said he is basing his Alloy No. 3 contracts for next year on an 18-cent premium, assuming an 8-cent SHG premium. "We've been quoted 8 for next year," he said. The alloyer added that most customers who have already locked in the alloy material for next year have bought material for the first quarter and, to a lesser extent, the first half. "If they want farther [into 2013] I might go higher just to be safe," he said.

However, another alloyer recently said that 17 cents is a more typical Midwest number, while alloyers further west have said they've sold at 16 cents.

A diecaster said his company considered it "too early" to negotiate 2013 contracts, based on the current economic uncertainty.

In the SHG market, sources recently have put next year's annual contracts in a range of 7.25-8 cents, whereas spot deals have been running at 7-8 cents. "I don't know if we can buy at 7 cents anymore," an alloyer said, "but we don't need to worry about it; we have metal bought at 7 for the rest of the year."

"People are booking annual contracts for next year at the 8 cent number, so that seems to be a real number," a zinc trader said. "There are some people who have dug their heels in and are going to wait; we'll see if they're right or wrong."

"Business is quiet because the steel mills are all basically shut down," he said, adding, however, that some of the steel mills anticipate a business pickup in January and are planning to ramp up production to higher levels at that time. "That's been the pattern for the last two years," he said.

The trader estimated that major consumers -- mostly the steel mills -- will secure 2013 contracts in a range of 7.5-8 cents. Last year, steel mills negotiated deals for 2012 in a range of roughly 6.75-7 cents, according to market sources.

The Platts assessment for SHG remained at 7.5 cents plus LME cash this week, while the assessment for Alloy No. 3 held at 17.5 cents plus LME cash.

--Laura Gilcrest, laura_gilcrest@platts.com
--Edited by Lisa Miller, lisa_miller@platts.com

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