SHANGHAI, Dec. 23 (SMM) - TCs of imported zinc concentrate dropped precipitously. Traded prices were as low as $30-40 per dry metric tonne recently, SMM reported, with the highest around $230 per dry metric tonne in 2015. Import window remains closed with yuan’s continuous depreciation, although the SMM/LME zinc price ratio rose to 8.7 at one point, SMM said.

As to China’s domestic zinc concentrate TCs, prices remained extremely low in the latter half of this year, and continued to hit record lows recently. This means severe supply shortages, but did not lead to output cut by many smelters. TCs fell below 4,500 yuan per tonne (zinc content) during 2011-2012 when a large number of zinc smelters slashed production, pushing down operating rates to 60% at one point. But as zinc prices are high in 2016, leaving TCs actually above smelters’ cost lines. So their operating rates remained around 75%, SMM explained.

Zinc Concentrate Supply

Let’s take a look at global zinc concentrate supply. China, Australia and Peru, major zinc concentrate producing regions in the world, accounted for 32, 12% and 11% in global supply in late 2015.

Large mines with high grade slashed output or suspended production during 2015-2016. Closures include Lisheen and Century mines. Glencore also cut output at its mines, which affected the market mainly in 2016. Overseas zinc concentrate output decreased noticeably in 2016.

Output of China’s domestic ore increased slightly in 2016, but this is far insufficient to offset output declines in 2015, SMM said. Output in China had fallen 510,000 tonnes in 2015 due to inspections at mines. As such, global zinc concentrate supply declined remarkably over the past two years.

Global zinc concentrate output (excluding China) was 5.56 million tonnes in the first nine months of 2016, a year-on-year drop of 14.2%, according to the International Lead & Zinc Research Organization (ILZSG). Output in Australia and Peru is expected to decrease 730,000 tonnes in 2016, and this will precipitate a rise to 36% of China’s share in global zinc concentrate production, SMM said. But China’s output will only increase 100,000 tonnes this year, compared to the 9% decline in global zinc concentrate output.

Conclusion

TCs of imported zinc concentrate are expected to hover at lows before Q2 2017, and may improve later as ore supply tightness eases, SMM predicts.

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