LME Zinc. Zinc mine production and usage by continent 2016 SETTING THE GLOBAL STANDARD. Zinc s main end uses are: Zinc production process

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1 LME Zinc SETTING THE GLOBAL STANDARD LME Zinc first started trading on the London Metal Exchange (LME) in 192, with the current specification introduced in 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 Blueish-silver in its appearance, it is generally hard and brittle but becomes ductile between 1 and 15 C ( F). At higher temperatures the metal reverts back to its brittle state and can then be crushed by beating. Whilst fragile in its pure state, alloyed zinc can have higher impact strength than other die casting alloys. 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 such as steel or iron in molten zinc to form a protective layer to prevent corrosion. Zinc-coated steel can also tolerate higher loads and is fire resistant. Die-casters manufacture strong, complex and intricately shaped metal components such as key rings, screws, seatbelt buckles and so on. Combining copper and zinc creates brass, an alloy which is used for radiator tubes and tanks, musical instruments, clock mechanisms, pipe/water fittings and nuts and bolts. The proportions of zinc and copper can range from 65:35 to 5:5 (copper:zinc) to create different types of brass alloys with varying mechanical and electrical properties. End users of zinc take the output of the first users as an input of their manufacturing processes for example in the construction, automotive, hardware/furniture, electronic, medical, toy and clothing industries.. Zinc s main end uses are: construction manufacturing fertilisation chemical supplements. Zinc can be repeatedly recycled without any detriment to its chemical and physical properties. According to the International Zinc Association, approximately 7% of the zinc produced worldwide originates from mined ores and the other 3% from recycled or secondary zinc. Zinc mine production and usage by continent % 3% 17% Zinc metal production 13% 7% Zinc metal usage 17% 1 Europe Africa America Asia Oceania 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 concentrated as it only contains 5-15% zinc when first mined. This is done by crushing Zinc concentrate contains roughly 55% zinc. About 25-3% is sulphur, which needs to be removed either by roasting or sintering. The concentrate is heated to 9 C and turns into zinc oxide when combined with oxygen Zinc oxide is then dissolved in sulphuric acid to separate it from other minerals such as iron, lead and silver to produce impure zinc sulphate. The solution is then purified and zinc metal is extracted via electrolysis The zinc metal is then removed from the aluminium cathodes (used in the electrolysis process), melted in a furnace and cast into zinc ingots Secondary zinc is mostly recovered in the form of off-cuts from die-casting and dross from the hot baths used in galvanising. The amount of zinc on steel products is often too small to be recovered and recycled LME Price

2 Trading zinc on the LME All of our non-ferrous metals contracts have close ties with the physical market. The prices discovered on the LME are used the world over in physical contracts, and because they can be physically settled using the LME warehouse network LME prices are truly reflective of global supply and demand. The interaction on the LME between the physical and financial communities provides highly liquid and deep order books with tight spreads. The LME s unique prompt date structure allows you to trade daily out to three months, weekly out to six months and monthly out to ten years. LME Zinc facts Lot size: 25 metric tonnes Tick value: $12.5 Cost-per-tick ratio:.216 Contract types: futures, options, TAPOs, monthly average futures, LMEminis and HKEX London Minis traded on HKEX derivatives platform. Useful reports LME Zinc trading volumes, price and stocks data can be found on our website: lme.com/reports Get real time and historical LME trading data from any of our licensed distributors by visiting: lme.com/licenseddistributor Get zinc-specific data: lme.com/zinc LME trading venues and prices Telephone The Exchange supports an inter-office market between LME members which operates 24 hours a day. All telephone trades are matched and cleared through our matching platform, LMEsmart, and clearing house, LME Clear. Electronic LMEselect is our electronic trading platform, which integrates with member trading platforms via a FIX API, either from member sites or via data centres to facilitate the lowest latency trading strategies. LMEselect is open for trading between 1: and 19: (London time). LMEselect is only available to LME members but clients of LME members can access it via member systems or member-sponsored Independent Software Vendor (ISV) platforms (see below for more details). The Ring The Ring, our open-outcry trading floor, is central to the process of price discovery. Each LME metal is traded in highly liquid five-minute Ring sessions, which are themselves representative of global supply and demand. Zinc is traded on the Ring at these times: 12:1-12:15, 12:5-12:55, 15:5-15:1, 15:45-15:5 and ceases trading at 16:25 (London time). Prices The LME Official Price for zinc, discovered on the Ring between 12:5-12:55, is used as the global reference. Contracts for material in a pre-fabricated state will be priced at a discount to the LME price and material further along the value chain, like rolled zinc sheets, at a premium. The LME Zinc Closing Price, discovered at 16:25, is used for margining and valuation purposes. 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: Contracts FFastFill Europe Limited OnixS.biz ATPlatform Technology Ion Trading Patsystems UK Limited Trading Technologies International Inc Fidessa plc Stellar Trading Systems RTS Realtime Systems ObjectTraining FIS (SunGard) Trading Screen Inc Cunningham Trading Systems LLC Redline Trading Solutions FlexTrade UK Limited Omnesys CQGT LLC Shanghai Feishu Software Technology Co. Ltd KCG SharpPoint System E-Sunny Ullink EPAM Systems, Inc Greeksoft Technologies PVT. LTD 3M 3rd Weds 3rd Weds - 3rd Weds LME options

3 LME Zinc trading data Average daily volume Daily volume for LME Zinc averages over 1, lots per day. LMEselect accounts for about 4% of all market traded volume. 14, 12, 1, Futures Options TAPOs Options and TAPOs %ages (RHS) 9% 8% 7% 6% ADV (Lots) 8, 6, 4, 2, Note: 217 is H % 4% 3% 2% % 3 Month price and intraday volatility The 3 Month (3M) price represents the price agreed to settle or deliver material three months from the time that the price is agreed and concentrates liquidity on one day. Volatility is an important parameter for some participants as it can often determine the level of involvement in a financial instrument. US dollars ($) 4,5 4, 3,5 3, 2,5 2, 1,5 1, 5 LME Zinc 3M price Volatility % (RHS) Volatility (%) 1/2/27 1/2/28 1/2/29 1/2/21 1/2/211 1/2/212 1/2/213 1/2/214 1/2/215 1/2/216 1/2/217 3rd Wednesday price 3rd Wednesday (3W) contracts are monthly futures that exist within the current prompt date structure for all major LME contracts expiring on the 3rd Wednesday of each month. US dollars ($) $3,5 $3, $2,5 $2, $1,5 LME Zinc 3W price LME Zinc 3W ADV (RHS) 25, 2, 15, 1, Lots $1, $5 5, $ JAN MAR MAY JUL SEP NOV JAN MAR MAY JUL SEP NOV JAN MAR MAY

4 3M to 3rd Wednesday spread This is the spread between the 3M rolling forward contract and a monthly futures contract or an adjustment of a position from the daily expiry (three months forward) into monthly expiry. Month 2 Month 3, US dollars ($) /2/27 1/2/28 1/2/29 1/2/21 1/2/211 1/2/212 1/2/213 1/2/214 1/2/215 1/2/216 1/2/217 Calendar spread 3rd Wednesday to 3rd Wednesday spreads are calendar spreads used for rolling a position from one month to another. Month 2 Month 3, US dollars ($) /2/27 1/2/28 1/2/29 1/2/21 1/2/211 1/2/212 1/2/213 1/2/214 1/2/215 1/2/216 1/2/217 LME Zinc arbitrages Regional prices for zinc are impacted by different factors including economic, physical and logistical influences. Traders can arbitrage the differences in zinc price on the Shanghai Futures Exchange (SHFE) and the Multi Commodity Exchange of India (MCX). US dollars ($) 4, 3,5 3, 2,5 2, LME 3M SHFE (EX VAT 17%) MCX 1,5 1, J 216 F M A M J J A S O N D 217 J F M A M J J A S O N

5 LME Zinc contract specification Contract specification Contract names and codes Underlying material Contract type Delivery type Lot size Contract period Price quotation Clearable currencies LME Zinc LME Zinc (ZS) Special high-grade zinc of % purity minimum Futures Physically settled 25 metric tonnes Daily: out to 3 months Weekly: 3 out to 6 months Monthly: 7 out to 123 months US dollars per metric tonne US dollars, Japanese yen, sterling, euro Minimum price fluctuation (tick size) per metric tonne Venue Ring LMEselect Inter-office Outright $.5 $.5 $.1 Carries $.1 $.1 $.1 Termination of trading Trading venues Trading hours Margining Up until the close of the first Ring the day before the prompt date Ring, LMEselect and Inter-office telephone Ring: 11:4-17: London time LMEselect: 1: - 19: London time Inter-office: 24 hours a day 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

6 V1/518/ROC The London Metal Exchange (the LME ), 218. The London Metal Exchange logo is a registered trademark of The London Metal Exchange. All rights reserved. All information contained within this document (the Information ) is provided for reference purposes only. While the LME endeavours to ensure the accuracy, reliability and 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, completeness, reliability or suitability of the Information for any particular purpose. The LME accepts no liability whatsoever to any person for any loss or damage arising from any inaccuracy or omission in the Information or from any consequence, decision, action or non-action based on or in reliance upon the Information. The Information does not, and is not intended to, constitute 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 3.1. THE LONDON METAL EXCHANGE 1 Finsbury Square, London EC2A 1AJ Tel +44 ()