Zinc Smelters Idle Capacity on Price Slump, Gao Says (Update1) -Shanghai Metals Market

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Zinc Smelters Idle Capacity on Price Slump, Gao Says (Update1)

Industry News 11:46:12AM Jun 07, 2010 Source:SMM

SINGAPORE, June 7 -- Zinc smelters in China, the world's largest producer, have idled as much as 8.8 percent of capacity as prices decline and the nation bids to cool the property market, curbing demand, according to Shanghai Metals Market.

About 400,000 to 500,000 metric tons of the country's 5.7 million tons of annual capacity have been suspended on output cuts and maintenance shutdowns, Monica Gao, an analyst at the researcher and data provider, said by phone from Shanghai. Gao has studied China's zinc market for almost three years.

China is the world's consumer of the metal used to galvanize steel, and Gao's estimate adds to signs that the government's drive to prevent a property bubble is hurting demand for commodities used in construction. The price of copper, used in pipes and wires, has slumped 17 percent this year.

"Demand hasn't been good this year," Gao said on June 4. "Some of the smaller producers have brought forward their planned maintenance to help alleviate cost pressures and reduce the inventories they have on hand."

Zinc on the Shanghai Futures Exchange has lost 35 percent this year, tumbling to as low as 13,900 yuan ($2,035) a ton today, while London prices have shed 38 percent to $1,595 a ton, the worst base-metal performer. Stockpiles in warehouses monitored by the Shanghai exchange were 295,454 tons last week, the highest level since futures started trading in 2007.

Shares Slump

Shares of Zhuzhou Smelter Group Co., China's largest zinc maker, have lost 38 percent this year as first-quarter profit plunged 73 percent on the lower prices. The stock fell as much as 4.3 percent today as Asian equities dropped on concern that Europe's sovereign-debt crisis may derail the recovery.

Zinc "prices are falling because consumption, which grew more than 10 percent to 4.2 million tons last year, has been weak," Gao said. "We're expecting this year's consumption growth to be capped at 10 percent." Zinc consumption in China expanded by 18 percent to more than 4.7 million tons last year, according to the International Lead and Zinc Study Group.

Property sales in Beijing, Shanghai and Shenzhen dropped as much as 70 percent in May as developers delayed offerings after government tightening measures, the Shanghai Securities News said June 1. Chinese authorities have boosted banks' reserve requirements three times this year and introduced real-estate curbs to cool lending and speculation.

'Output Cuts'

"We expect further output cuts by smelters that have to acquire concentrate," said Gao, referring to the semi-processed ore that's used to make the refined metal. The concentrate market has tightened as domestic mines withhold supplies because of the slump in refined-zinc and zinc-product prices, Gao said.

"The bigger producers, with their own mines, are a lot more resilient," she said. "We saw them continue to produce even when prices fell to about 8,000 yuan in 2008." Futures touched a low of 8,380 yuan a ton that year as the global recession slashed demand and investors cut commodity holdings.

The shortage of concentrate has seen processing fees, paid by Chinese miners to smelters for making metal from semi- processed ore, fall to about 5,000 yuan per ton for spot zinc concentrate, from 5,500 to 5,800 yuan a month ago, she said.

China's imports of refined zinc shipments dropped 71 percent in the first four months of this year compared with the same period last year, according to customs data. Shipments last year, buoyed by the country's $586 billion stimulus program, rose to 670,182 tons, three and a half times more than 2008.

 

Price

more
1# Zinc
Apr.26
21680.0
20.0
(0.09%)
0# Zinc
Apr.26
21750.0
20.0
(0.09%)
T/C for domestic zinc concentrate
May.01
6350.0
0.0
(0.00%)
T/C for imported zinc concentrate
May.01
240.0
0.0
(0.00%)
Zinc Alloy (Zamak3/ZX01)
Apr.26
22650.0
20.0
(0.09%)

Zinc Smelters Idle Capacity on Price Slump, Gao Says (Update1)

Industry News 11:46:12AM Jun 07, 2010 Source:SMM

SINGAPORE, June 7 -- Zinc smelters in China, the world's largest producer, have idled as much as 8.8 percent of capacity as prices decline and the nation bids to cool the property market, curbing demand, according to Shanghai Metals Market.

About 400,000 to 500,000 metric tons of the country's 5.7 million tons of annual capacity have been suspended on output cuts and maintenance shutdowns, Monica Gao, an analyst at the researcher and data provider, said by phone from Shanghai. Gao has studied China's zinc market for almost three years.

China is the world's consumer of the metal used to galvanize steel, and Gao's estimate adds to signs that the government's drive to prevent a property bubble is hurting demand for commodities used in construction. The price of copper, used in pipes and wires, has slumped 17 percent this year.

"Demand hasn't been good this year," Gao said on June 4. "Some of the smaller producers have brought forward their planned maintenance to help alleviate cost pressures and reduce the inventories they have on hand."

Zinc on the Shanghai Futures Exchange has lost 35 percent this year, tumbling to as low as 13,900 yuan ($2,035) a ton today, while London prices have shed 38 percent to $1,595 a ton, the worst base-metal performer. Stockpiles in warehouses monitored by the Shanghai exchange were 295,454 tons last week, the highest level since futures started trading in 2007.

Shares Slump

Shares of Zhuzhou Smelter Group Co., China's largest zinc maker, have lost 38 percent this year as first-quarter profit plunged 73 percent on the lower prices. The stock fell as much as 4.3 percent today as Asian equities dropped on concern that Europe's sovereign-debt crisis may derail the recovery.

Zinc "prices are falling because consumption, which grew more than 10 percent to 4.2 million tons last year, has been weak," Gao said. "We're expecting this year's consumption growth to be capped at 10 percent." Zinc consumption in China expanded by 18 percent to more than 4.7 million tons last year, according to the International Lead and Zinc Study Group.

Property sales in Beijing, Shanghai and Shenzhen dropped as much as 70 percent in May as developers delayed offerings after government tightening measures, the Shanghai Securities News said June 1. Chinese authorities have boosted banks' reserve requirements three times this year and introduced real-estate curbs to cool lending and speculation.

'Output Cuts'

"We expect further output cuts by smelters that have to acquire concentrate," said Gao, referring to the semi-processed ore that's used to make the refined metal. The concentrate market has tightened as domestic mines withhold supplies because of the slump in refined-zinc and zinc-product prices, Gao said.

"The bigger producers, with their own mines, are a lot more resilient," she said. "We saw them continue to produce even when prices fell to about 8,000 yuan in 2008." Futures touched a low of 8,380 yuan a ton that year as the global recession slashed demand and investors cut commodity holdings.

The shortage of concentrate has seen processing fees, paid by Chinese miners to smelters for making metal from semi- processed ore, fall to about 5,000 yuan per ton for spot zinc concentrate, from 5,500 to 5,800 yuan a month ago, she said.

China's imports of refined zinc shipments dropped 71 percent in the first four months of this year compared with the same period last year, according to customs data. Shipments last year, buoyed by the country's $586 billion stimulus program, rose to 670,182 tons, three and a half times more than 2008.