Higher shipments from China, the world's top consumer and producer of refined zinc, to LME warehouses in Asia could cap LME zinc prices , which have risen more than 10 percent this year.
Chinese importers had contracted more refined zinc for term shipments for delivery in 2014 and the bulk was set to be used as collateral for loans, traders said.
But tight credit in China has slowed domestic demand this year, weighing on Chinese prices, and traders said that had forced importers to store the metal in bonded warehouses, mostly in Shanghai and the southern province of Guangdong.
"If importers are not able to sell the stocks into the domestic market by October ... they may ship to the LME warehouses (in Asia)," said a manager at Shanghai-based firm, which imported zinc for its own consumption and trading.
The firm estimated there was more than 100,000 tonnes of refined zinc in bonded warehouses in Shanghai currently, said the manager, who declined to be named because he was not authorised to talk to the media.
China's refined zinc imports surged 39 percent to 421,130 tonnes in the first seven months of the year.
Some bonded zinc stocks in Guangdong that have been used in financing deals with foreign banks have already been moved to LME warehouses in Asia after an alleged metals financing scam came to light in early June, traders said.
The relocation was requested by foreign banks to secure the metal, even though it was alumina, aluminium and copper stocks in Qingdao port that were involved in the financing scam, they said.
A trader who works for an international trading firm said the company would move 1,000 tonnes of bonded zinc stocks from Guangdong to LME warehouses in Malaysia and Singapore in coming weeks.
Traders said Chinese banks had been willing to give letters of credit for zinc imports even after the scandal at Qingdao port, although they had tightened checks on the stocks.
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