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Two Zinc Smelters in Gansu Halt Output on Landslides (Update1)
Aug 23, 2010 10:30CST

SINGAPORE, Aug. 23 -- Two Chinese zinc producers in the south of Gansu province halted output after landslides disrupted power supplies and transport links, and damaged facilities, according to researcher Shanghai Metals Market.

Gansu Baohui Zinc Co.'s 60,000-metric ton smelter and Chengzhou Metallurgical Group Co.'s 50,000-ton smelter will "remain shut till at least the beginning of September," Zhu Yiman, an analyst at Shanghai Metals Market, said today after speaking with executives at the two plants. Officials at both companies couldn't be reached by Bloomberg News for comment.

Torrential rain this month triggered mudslides in the mountainous province of western China, leaving at least 1,364 people dead and hundreds injured. The southern province of Yunnan was also affected by landslides this week. China is the world's biggest producer of zinc, used to galvanize steel.

"The loss of output is too small to affect prices as the zinc market is oversupplied," Ni Xiaolei, a trader at Donghai Futures Co., said from Jiangsu today. "Near-term price direction will continue to be influenced by macroeconomic factors," said Ni.

Zinc, the worst performer on the London Metal Exchange this year, has fallen 19 percent as stockpiles tallied by the exchange reached 620,825 tons last month, a level not seen since June 2005. The metal for three-month delivery declined 0.9 percent to $2,071.50 a ton at 4:45 p.m. Singapore time.

China's Output

Total zinc production in China rose 27 percent to about 2.88 million tons in the first seven months of this year from the same period in 2009, according to data from the statistics office. Stockpiles tallied by the Shanghai Futures Exchange jumped to 295,454 tons in the week through June 3, the highest level since futures started trading in 2007.

"Baohui was shut last month for maintenance and was supposed to restart this month, but it's not possible now," Zhu said by phone from Shanghai today. "We've not heard of any output disruptions at Yunnan smelters because most of the producers are located quite far from the landslide area."

Baiyin Nonferrous Metal Co., another nonferrous producer in Gansu, suspended operations at its Changba zinc and lead mine on Aug. 12 after a mudslide, Shanghai Metals Market said in a report dated Aug. 18. A telephone call by Bloomberg News today to Baiyin Nonferrous's general office number, listed on the company website, was not answered.

Baiyin's zinc and lead smelting won't be affected by the mine disruption as the company has stockpiles of concentrates, the report said, citing executives that it didn't identify. Output from the Changba mine represents about half of the smelter's total zinc and lead ore consumption, the report said.

Global refined-zinc production was 1.095 million tons in May, exceeding demand of 1.039 million tons, the International Lead and Zinc Study Group said in a July 15 report.



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