SHANGHAI, Dec. 15 (CBI China) -- A recent CBI survey of 33 zinc smelters (total capacity: 3.78 million mt/yr) revealed the following insights:

    1) Production 

    According to the survey, output of the 33 zinc smelters during November was 179 kt, with average operating rates of 51.7%. Operating rates at smelters with capacity of 100-150kt/yr (including 100kt and 150kt), and above 150kt/yr experienced the largest drops, down 18.8% and 10%, respectively. The main reasons given are:

    Fristly, In October, small smelters began to adjust production due to their relatively low ability to resist risk under if zinc prices fall sharply. While large and medium-sized smelters were more cautious with regard to cuts in production, any effect would be delayed, and any results would be shown in the output changes in November. 

    Secondly, operating rates of medium-sized smelters (with annual zinc output of 100-150kt, including 100kt and 150kt) experienced the largest rate drop, with average operating rates as low as 33% of capacity, down 18.8% from October levels, and which was far lower than other sized smelters. The drop was due mainly to the low self-sufficiency rate of raw materials and high dependence on domestic ores. Along with continuous declines in prices of raw materials and spot zinc, it was increasingly difficult for medium sized smelters to purchase domestic raw materials, especially when zinc prices remained at RMB 9,000/mt.

    Thirdly, output of large-sized smelters (with an annual zinc output above 150 kt) has shrunk further, with operating rates falling by 8% during October and by 10% during November.  The most notable was Hunan Zhuzhou Smelter, whose zinc output was down by 20-30% in November, and whose zinc alloy output also reduced. Other smelters, such as Huludao Zinc Plant (390 kt/yr), Yunnan Xiangyun Feilong (180 kt/yr), Shaanxi Dongling (210 kt/yr), all adjusted production in November, so operating rates of large-sized smelters will continue to decline by 10% from October levels.  

    2) Inventories   

    According to the survey, CBI found zinc ingots inventories varied among the smelters. Nine smelters said they almost have no inventory, while the remaining 24 were holding some level of inventory. CBI believes although there are production limits at these smelters, the frequency and amount of shipments dropped significantly. As zinc ingots inventories in many markets such as in Shanghai did not fall significantly, CBI believes there are  zinc ingots inventories at the 24 smelters.

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