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LME Zinc

SETTING THE GLOBAL STANDARD

LME Zinc first started trading on the London Metal Exchange (LME) in 1920, with
the current specification introduced in 1986. It is one of the most liquid markets
on the LME and many analysts refer to its direct relationship with global economy
because of its role in galvanising steel to protect it from weather and corrosion,
making it essential for the construction industry.
As a metal, zinc was first officially recognised by German
chemist Andreas Sigismund Marggraf in 1746. Blueish-silver in its Zinc’s main end uses are:
appearance, it is generally hard and brittle but becomes ductile
between 100 and 150 °C (212-302 °F). At higher temperatures the • construction
metal reverts back to its brittle state and can then be crushed • manufacturing
by beating. Whilst fragile in its pure state, alloyed zinc can have • fertilisation
higher impact strength than other die casting alloys. • chemical
• supplements.
The zinc industry has two main types of end user: first users
and end users. First users include galvanisers, die-casters,
brass-makers and relatively smaller applications like chemicals
manufacturing. Galvanising involves coating other metals
Zinc can be repeatedly recycled without any detriment to its
such as steel or iron in molten zinc to form a protective layer
chemical and physical properties. According to the International
to prevent corrosion. Zinc-coated steel can also tolerate higher
Zinc Association, approximately 70% of the zinc produced
loads and is fire resistant. Die-casters manufacture strong,
worldwide originates from mined ores and the other 30%
complex and intricately shaped metal components such as key
from recycled or secondary zinc.
rings, screws, seatbelt buckles and so on. Combining copper
and zinc creates brass, an alloy which is used for radiator tubes
Zinc mine production and usage
and tanks, musical instruments, clock mechanisms, pipe/water
fittings and nuts and bolts. The proportions of zinc and copper by continent
3% 2016 1%
can range from 65:35 to 50:50 (copper:zinc) to create different
17% 17%
types of brass alloys with varying mechanical and electrical 1% 1% Europe
properties. Africa
Zinc metal 13% Zinc metal 11%
End users of zinc take the output of the first users as an input of production usage America

their manufacturing processes for example in the construction, 66% 70% Asia
automotive, hardware/furniture, electronic, medical, toy and Oceania
clothing industries..
Source: International Lead and Zinc Study Group (ILZSG)

Zinc production process

Zinc mining Zinc concentrate Zinc sulphate High grade zinc Recycling
Zinc needs to be Zinc concentrate contains Zinc oxide is then dissolved in The zinc metal is then Secondary zinc is mostly
concentrated as roughly 55% zinc. About sulphuric acid to separate it removed from the recovered in the form of
it only contains 25-30% is sulphur, which from other minerals such as aluminium cathodes off-cuts from die-casting
5-15% zinc when needs to be removed iron, lead and silver to (used in the electrolysis and dross from the hot
first mined. This either by roasting or produce impure zinc sulphate. process), melted in a furnace baths used in galvanising.
is done by crushing sintering. The concentrate The solution is then purified and cast into zinc ingots The amount of zinc on
is heated to 900°C and and zinc metal is extracted steel products is often
turns into zinc oxide when via electrolysis too small to be recovered
combined with oxygen and recycled

LME Price
Trading zinc on the LME
All of our non-ferrous metals contracts have close ties with LME trading venues and prices
the physical market. The prices discovered on the LME are used Telephone – The Exchange supports an inter-office market
the world over in physical contracts, and because they can be between LME members which operates 24 hours a day. All
physically settled – using the LME warehouse network – LME telephone trades are matched and cleared through our matching
prices are truly reflective of global supply and demand. platform, LMEsmart, and clearing house, LME Clear.
The interaction on the LME between the physical and financial Electronic – LMEselect is our electronic trading platform, which
communities provides highly liquid and deep order books with integrates with member trading platforms via a FIX API, either
tight spreads. from member sites or via data centres to facilitate the lowest
latency trading strategies. LMEselect is open for trading between
The LME’s unique prompt date structure allows you to trade daily
01:00 and 19:00 (London time). LMEselect is only available to
out to three months, weekly out to six months and monthly out
LME members but clients of LME members can access it via
to ten years.
member systems or member-sponsored Independent Software
LME Zinc facts Vendor (ISV) platforms (see below for more details).
• Lot size: 25 metric tonnes
The Ring – The Ring, our open-outcry trading floor, is central
• Tick value: $12.50
to the process of price discovery. Each LME metal is traded in
• Cost-per-tick ratio: 0.216
highly liquid five-minute Ring sessions, which are themselves
• Contract types: futures, options, TAPOs, monthly average
representative of global supply and demand. Zinc is traded on
futures, LMEminis and HKEX London Minis traded on HKEX
the Ring at these times: 12:10-12:15, 12:50-12:55, 15:05-15:10,
derivatives platform.
15:45-15:50 and ceases trading at 16:25 (London time).

Prices – The LME Official Price for zinc, discovered on the Ring
Useful reports between 12:50 -12:55, is used as the global reference. Contracts
for material in a pre-fabricated state will be priced at a ‘discount’
LME Zinc trading volumes, price and stocks data can be found
to the LME price and material further along the value chain,
on our website: lme.com/reports
like rolled zinc sheets, at a ‘premium’. The LME Zinc Closing
Get real time and historical LME trading data from any of our Price, discovered at 16:25, is used for margining and valuation
licensed distributors by visiting: lme.com/licenseddistributor purposes.
Get zinc-specific data: lme.com/zinc ISVs
Members and their clients may choose to access LMEselect via
member-sponsored ISV platforms. Client traffic passes through
an ISV pre-trade risk engine endorsed and fully controlled by the
sponsoring member’s compliance team. The following ISVs have
passed LME conformance tests for order routing applications
connecting via the LMEselect API for LME Zinc:
Trading Systems LLC

Greeksoft Technologies
FlexTrade UK Limited
Trading Technologies

SharpPoint System

EPAM Systems, Inc


Software Technology
Trading Screen Inc
FFastFill Europe

Redline Trading
International Inc
Patsystems UK

ObjectTraining
Stellar Trading

Shanghai Feishu
FIS (SunGard)
RTS Realtime

Cunningham
Technology
ATPlatform

Ion Trading

Fidessa plc

CQGT LLC
Solutions
OnixS.biz

Omnesys
Systems

Systems

E-Sunny

PVT. LTD
Limited

Limited

Co. Ltd

Ullink
KCG

Contracts

3M

3rd Weds

3rd Weds -
3rd Weds

LME
options
3,000 60

2,500 50

Volatility % (RHS)
2,000 40

US dollars ($)
1,500 30

1,000 20

500 10

LME Zinc trading data 0 0

05

06

07

08

09

10

11

12

13

14

15

16

17

18

19
Average daily volume Futures Options TAPOs Options and TAPOs %ages (RHS)

20

20

20

20

20

20

20

20

20

20

20

20

20

20

20
160,000
9%
Daily volume for LME Zinc averages
140,000 8%
over 100,000 lots per day. LMEselect
accounts for about 40% of all market 120,000 7%
traded volume. ADV (Lots) 100,000 6%

80,000 5%
Aluminium
4%
60,000
3%
40,000
2%
20,000
1%
0
0%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Zinc
LME Aluminium 3W price LME Aluminium 3W ADV (RHS)
35,000
3,000
30,000
2,500
3 Month price and intraday volatility 12,000
25,000
Zinc 3M price Volatility % (RHS) 120
The 3 Month (3M) price represents the 2,000
US dollars ($)

20,000
price agreed to settle or deliver material

Lots
10,000 1,500
100
three months from the time that the price 15,000
is agreed and concentrates liquidity on 10,000 1,000
one day.
8,000
5,000 80
500
Volatility is an important parameter

Volatility % (RHS)
0
0
US dollars ($)

for some participants as it can often JAN MAY SEP JAN MAY SEP JAN MAY SEP JAN MAY SEP
6,000 2015 60
determine the level of involvement in 2016 2017 2018
a financial instrument.
4,000 40
Aluminium

2,000 20

0 0
05

06

07

08

09

10

11

12

13

14

15

16

17

18

19
20

20

20

20

20

20

20

20

20

20

20

20

20

20

20

3rd Wednesday price LME Zinc 3W price LME Zinc 3W ADV (RHS)
16,000
3rd Wednesday (3W) contracts are 4,000
14,000 Zinc
monthly futures that exist within the 3,500
12,000
current prompt date structure for all 3,000
US dollars ($)

major LME contracts expiring on the 10,000


2,500
3rd Wednesday of each month. 8,000
Lots

2,000
6,000
1,500
4,000
1,000
2,000
500
0
0
JAN MAY SEP JAN MAY SEP JAN MAY SEP JAN MAY SEP
2015 2016 2017 2018
-50

20

07

08

09

10

11

12

13

14

15

16

17
Month 2 – Month 3, US dollars ($)

20

20

20

20

20

20

20

20

20

20

20
1/

1/

1/

1/

1/

1/

1/

1/

1/

1/

1/
10

2/

2/

2/

2/

2/

2/

2/

2/

2/

2/

2/
0

-10
Aluminium

-20

-30

-40

07

08

09

10

11

12

13

14

15

16

17
3M to 3rd Wednesday spread 30

20

20

20

20

20

20

20

20

20

20

20
2,800 LME 3M SHFE (EX VAT 17%) MCX

1/

1/

1/

1/

1/

1/

1/

1/

1/

1/

1/
This is the spread between the 3M rolling

2/

2/

2/

2/

2/

2/

2/

2/

2/

2/

2/
20
2,600
forward contract and a monthly futures 10

US dollars ($)
contract or an adjustment of a position 2,400
0
from the daily expiry (three months 2,200
forward) into monthly expiry. -10
3,($)

2,000
-20
dollars

Aluminium
– Month

1,800
-30
Month 2US

-40
1,600

-50
1,400
-60
1,200
-70
1,000
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J
07

08

09

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17
2016 2017 2018 2019
20

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20

20

20
1/

1/

1/

1/

1/

1/

1/

1/

1/

1/

1/
2/

2/

2/

2/

2/

2/

2/

2/

2/

2/

2/
Calendar spread 20
3rd Wednesday to 3rd Wednesday 15
spreads are calendar spreads used for 10
Month 2 – Month 3, US dollars ($)

rolling a position from one month to Zinc 5


another. 0
-5
-10
-15
-20
-25
-30Aluminium
-35
7

7
00

00

00

01

01

01

01

01

01

01

01
2

2
1/

1/

1/

1/

1/

1/

1/

1/

1/

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1/
2/

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2/

2/

Zinc

LME Zinc arbitrages 4,000 LME 3M SHFE (EX VAT 17%) MCX
Regional prices for zinc are impacted by 3,500
different factors including economic,
physical and logistical influences. Traders 3,000

can arbitrage the differences in zinc price 2,500


US dollars ($)

on the Shanghai Futures Exchange (SHFE)


2,000
and the Multi Commodity Exchange of
India (MCX). 1,500

1,000

500

0
J F M A M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D J
2016 2017 2018 2019
LME Zinc contract specification
Contract specification LME Zinc

Contract names and codes LME Zinc (ZS)

Underlying material Special high-grade zinc of 99.995% purity minimum

Contract type Futures

Delivery type Physically settled

Lot size 25 metric tonnes

Daily: out to 3 months


Contract period Weekly: 3 out to 6 months
Monthly: 7 out to 123 months

Price quotation US dollars per metric tonne

Clearable currencies US dollars, Japanese yen, sterling, euro

Venue Outright Carries


Minimum price fluctuation (tick size) Ring $0.50 $0.01
per metric tonne LMEselect $0.50 $0.01
Inter-office $0.01 $0.01

Termination of trading Up until the close of the first Ring the day before the prompt date

Trading venues Ring, LMEselect and Inter-office telephone

Ring: 11:40 - 17:00 London time


Trading hours LMEselect: 01:00 - 19:00 London time
Inter-office: 24 hours a day

Margining Contingent variation margin applied

For more information about LME Zinc please visit our website at lme.com/zinc
or get in touch with the team: sales@lme.com
© The London Metal Exchange (the “LME”), 2018. The London Metal Exchange logo is a registered trademark of The London Metal Exchange.
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completeness of the Information, neither the LME, nor any of its affiliates makes any warranty or representation, express or implied, or accepts any responsibility or liability for, the accuracy,
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investment advice, commentary or a recommendation to make any investment decision. The LME is not acting for any person to whom it has provided the Information. Persons receiving the
Information are not clients of the LME and accordingly the LME is not responsible for providing any such persons with regulatory or other protections. All persons in receipt of the Information should
obtain independent investment, legal, tax and other relevant advice before making any decisions based on the Information.
LME contracts may only be offered or sold to United States foreign futures and options customers by firms registered with the Commodity Futures Trading Commission (CFTC), or firms who are
permitted to solicit and accept money from US futures and options customers for trading on the LME pursuant to CFTC rule 30.10.
V3/0119/ROC

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