Will the Processing Fee of Zinc Oxide Increase under the Backdrop of Soaring Natural Gas Prices?

SHANGHAI, Dec 7 (SMM) – Natural gas is mostly used in the heating process of the reverberatory furnace or refining pot, so that zinc oxide processing enterprises can obtain higher quality zinc oxide.

Most companies consume 90-120 cubic metres of natural gas to yield 1 mt of zinc oxide. Therefore, natural gas prices exert a great impact on the zinc oxide profits, accounting for 40-70% of the processing cost of zinc oxide enterprises. This year's natural gas prices have increased about 3,000-3,500 yuan/mt compared with the same period in previous years, equivalent to 1.95-2.28 yuan/cubic metre, and the production cost of zinc oxide enterprises will increase about 175.5-273.6 yuan/mt compared with previous years. (This data only represents the theoretical value, the actual situation may deviate according to other factors like region)

Historically, natural gas prices generally stabilise just after the high season in summer. However, China’s natural gas prices have maintained a strong growth rate since the summer has passed. Especially since October this year, natural gas prices have increased significantly year-on-year. The price of natural gas in November hit a record high since 2017.
The profits at companies shrank sharply amid price hike of natural gas, coal and other energy sources on COVID pandemic and rising freight costs. Zinc prices fluctuated greatly in H2 amid high raw material prices, macro policies and overseas fronts. On the whole, zinc oxide companies need to be cautious about the current changing economic environment on the increase in processing costs and high raw material prices.