SMM Zn Survey: Operating Rates Up

SHANGHAI, Jan. 24 (SMM) - The latest SMM survey of 41 major domestic zinc smelters (total capacity: 5.125 million mt/yr) revealed the following insights:

1) Operating Rates Up
The survey involved 41 domestic 41 zinc smelters of various sizes, but included all major smelters whose total capacity account for over 70% of CNIA (China Nonferrous Metals Industry Association) monthly zinc output. The total capacity of all surveyed enterprises was 5.125 million mt/yr, 80 kt/yr of which was idle. Total output during December was 338.1 kt, up 3% from 326.8 kt in November. The average operating rate at the 41 smelters was 80.42%, up 2.7% from November.

Operating rates at large and medium enterprises were higher, but operating rates at smaller enterprises were down MoM. The average operating rate at large domestic smelters (capacities above 200 kt/yr) was 83.08%, up 6% MoM.  Zhongjin Lingnan Nonfemet’s  Shaoguan Smelter was still closed, while its Danxia Smelter restarted production in December. Shaanxi Hanzhong Zinc Industry was forced to cut output due to power restrictions. As a result, the average operating rate at large smelters during December was still below the  annual average of 85%, despite increases from November operating rate.

Operating rates at medium sized enterprises also grew during December. The average operating rate at smelters with capacities between 100-200 kt/yr (including 100 and 200 kt/yr) grew to 88.72%, up 1.5% from 87.26% in November.  Major changes include lower output in southwest China due to the seasonal low-water period, which affects the availability of hydro-electric power. Some enterprises, such as Luoping Zinc and Electricity Company, were forced to cut output due to these power shortages. Other enterprises were reporting higher production costs due to rising electricity prices in some areas, resulting in higher treatment charges. Xiangyun Feilong Nonferrous Metals Company was forced to cut output due to shortages of raw materials, but has since resumed normal operations.  Hechi Nanfang Nonferrous Metals (Group) Smelting Company has not restarted production since power restrictions were imposed during December in Guangxi province.  The average operating rate at Hechi Nanfang Company remains near 50%. Liuzhou Liyin Metal Material Company (capacity 100 kt/yr) suspended production during November to conduct maintenance, but has not yet restarted production.

The average operating rate at small smelters (capacities 20-100 kt/yr) during December was 57.58%, and down from November levels for a number of reasons. In addition to inspection at mines in Hunan province, power restrictions in Guangxi province became stricter during December. Sichuan Huidong Lead and Zinc mine is still experiencing reorganization.  In Guizhou province, the local government announced it has completed eliminating outdated capacity, but since Guizhou province relies on thermal power, some enterprises are not able to restart production due to shortages in thermal coal.  Gansu Baohui Industry Group and  Gansu Chengzhou Zinc Industry Company both suspended production during December due to falling zinc prices, as well as from power restrictions. Both enterprises restarted production in early January 2011. 

2) Raw Material Supply Sufficient
Among the surveyed enterprises, only 19.5% reported raw material shortages, unchanged from November levels. Mining enterprises in north China suspended dressing while were continuing to mine during the cold weather.  As the Chinese New Year holiday nears, some enterprises have suspended all operations. 90% of dressing plants in Inner Mongolia have suspended production and most zinc concentrate traded in markets or used to maintain  production is from existing stockpiles. Inspections at mines in the Xiangxi area of Hunan province are still under way, with production at enterprises or at mines affected. Some enterprises were able to maintain production with existing inventories, but since recertification of mines of Xiangxi area will continue until late June, 2011, raw material supply will become tighter.

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