SHANGHAI, Mar. 21 (SMM)--A recent SMM survey of domestic 42 zinc smelters (total capacity: 5.245 million mt/yr) revealed the following insights:
1) Operating Rates Up
The survey involved in 42 domestic zinc smelters of different sizes, including all major smelters. Total capacity at the 42 smelters account for 75% of the monthly domestic zinc output by members of the China Nonferrous Metals Industry Association (CNIA). Total capacity of the surveyed enterprises was 5.245 million mt, 100 kt of which was currently idled. Total output during February was 351 kt, down 1.1% from 355 kt during January. The average operating rate at the 42 smelters was 81.87%, down 1% from the previous month.
Operating rates at medium and small smelters were up, while operating rates at larger smelters fell. The average operating rate at large smelters (capacities above 200 kt/yr) was 75.82%, down 10% from January. Zhongjin Lingnan Nonfemet’s Shaoguan smelter was still closed, while Hanzhong Zinc Industry Company has not yet reached full capacity. Shanxi Dongling Zinc Industry Company cut output by 50% due to raw material shortages in February, causing the average operating rate at large smelters to fall significantly.
Operating rates at medium-sized enterprises (capacities between and including 100kt/yr and 200kt/yr) continued to rise during February, with the average operating rate rising to 92.14%. Major changes among smelters include an increase to 90% at Hechi Nanfang Nonferrous Metal Smelt Company. Since September 2010, operating rates at the smelter were only 50% due to power restrictions in Guangxi province. Operating rates at Sichuan Sihuan Electrolytic Zinc Company were down due to unit maintenances, while Xiangyun Feilong Nonferrous Metals Company has not reached full capacity due to a lack of raw materials.
Operating rates at smaller smelters (capacities up to 100 kt/yr) during February were 70.78%, up 8.51% from January. The average price of #0 zinc was RMB 18,893.3/mt, up RMB 501/mt from January’s RMB 18,392.5/mt. Higher zinc prices were causing operating rates at small enterprises to increase significantly. Major increases in rates were found at Gansu Chengzhou Mining and Metallurgic Company, which updated equipment in January following the integration of Baiyin Nonferrous Metals Company and Chengzhou Mining Company, and which had restarted production in February. Operating rates at Gansu Baohui Zinc Industry Company during January were 50%, but reached full capacity during February.
2) Raw Material Supply Tightens
Most of the surveyed enterprises were reporting sufficient raw material supplies, but the number of enterprises complaining of raw material shortages grew to 31% in February, up from 28.6% in January and 19.5% in December. Some mining enterprises in north China have not restarted production due to the cold weather, especially those located in Inner Mongolia. Other mining enterprises also cut output due to recent falling zinc prices, resulting in shortages of zinc concentrate for local smelters. Raw material shortages will only grow as more enterprises from other metal sectors invest in zinc smelting. One such enterprise is Humon Group, which was primarily involved in precious metals but which will now invest in a 100 kt/yr zinc smelting project in Inner Mongolia. Chihong Zn & Ge Company will also put a new 140 kt/yr project into operation in Hulun Buir, Inner Mongolia by early 2012.