SHANGHAI, Jun. 26 (SMM) -
China's zinc output dropped sharply during January and February, with most producers conducting maintenance. According to the NBS, zinc output during January and February was up 1.7% YoY, to 787,000 mt. Output in January was 398,000 mt, down 17.3% from December's levels, while output in February was 389,000 mt. Daily average output in January was 12,838.7 mt, while daily output in February averaged 13,892.9 mt, both lower than the 15,516.1 mt in December 2012. One analyst said some smelters suspended production on top of zinc reserves purchase by the SRB because they saw negative factors in the market. Output in March will not grow given current demand. Downstream buyers remained cautious after the Chinese New Year holiday. Operating rates at Luludao Zinc Industry Company – the second largest zinc smelter in China – were now only 60%, and it produces 8,000 mt of zinc ingot and 11,000 mt of zinc products each month. The smelter will not suspend production, but output will drop.
According to the CNIA, China's YTD zinc concentrate output through February was 616,500 mt, up 6.9% YoY, but down 34% from the output during November-December last year.
Output in Hunan, Guangxi, Inner Mongolia, Fujian and Guangdong slid sharply.
SMM believes rising TC since the start of 2012 and suspension at some mines during the Chinese New Year holiday were a major factor causing zinc concentrate output to fall.
First, mines have maintained high discounts for zinc concentrate TC since the start of 2013 given oversupply. As zinc prices did not improve, zinc concentrate prices were low, and this caused profits at mines to slide, and them to hold goods. With high inventories at hand, mines were unwilling to produce. Besides, mines suspended production for half a month due to the Chinese New Year holiday, and combined with labor shortages after the holiday, zinc concentrate output was affected.