Abnormal Thallium Concentration in Surface Water in Hunan SHFE Lead and Zinc Prices Rise in Response How Are Local Mines and Smelters Affected? [SMM Express]

SMM 24 Mar: On the morning of March 24, stimulated by the news that the thallium concentration in the surface water at the Dahan River Beach automatic monitoring station of the Leishui River, which spans Chenzhou and Hengyang, showed abnormal readings, SHFE lead and SHFE zinc main contracts both climbed. During the session, SHFE zinc's gains reached as high as 1.72%, while SHFE lead surged 1.77%. By the close of the day, SHFE lead was up 1.14% to 17,670 yuan/mt, and SHFE zinc was up 1.64% to 24,200 yuan/mt. In terms of spot prices, on March 24, SMM #0 zinc ingot spot quotes rose 310 yuan/mt to 24,110-24,210 yuan/mt, with an average price of 24,160 yuan/mt; SMM #1 lead ingot spot quotes remained unchanged from the previous trading day, holding steady at 17,250-17,350 yuan/mt, with an average price of 17,300 yuan/mt.》Click to view SMM metal spot prices On the news front, according to a report by China Youth Daily on March 24, after the thallium concentration in the surface water at the Dahan River Beach automatic monitoring station (hereinafter referred to as "Dahan River Station") showed abnormal readings, a deputy director of the Hunan Provincial Department of Ecology and Environment, who oversees emergency monitoring and accident investigation, led an expert team to Chenzhou for guidance on handling the situation on the afternoon of March 23. According to a notice issued by the Yongxing County Government Office in Chenzhou, Hunan, at 8 PM on March 16, the thallium concentration in the surface water at the Dahan River Beach automatic monitoring station showed abnormal readings. The Yongxing County Government decided to initiate a Level IV emergency response for the Leishui River Basin (Yongxing Section) at midnight on March 17. It is known that thallium is a highly toxic substance, also present as an associated element in lead-zinc ores. During the smelting process of lead-zinc ores, thallium volatilizes at high temperatures into flue gas and then enters wastewater, leading to the generation of thallium-containing wastewater, posing a certain threat to the environment. Public data shows that Hunan Province has abundant lead-zinc ore resources, with its zinc ore reserves occupying an important position nationwide. Ten large-scale lead-zinc mines have been identified in the province, six of which have reserves exceeding 1 million mt. By the end of the 20th century, the total proven reserves of lead-zinc ore in Hunan Province were around 10.48 million mt. Therefore, following the outbreak of this incident, SMM quickly conducted a survey on the production status of local zinc mines. According to SMM, the current production of local zinc mines and smelters is normal, and they have not been affected by related environmental protection issues. In terms of lead, SMM learned that most local primary lead smelters are maintaining normal production, with only a few small plants potentially affected. Currently, the impact is relatively small. For secondary lead, some secondary lead smelters in the affected area, considering their own circumstances, have temporarily stopped accepting scrap batteries. SMM will continue to monitor the progress of environmental protection. Regarding the fundamentals, taking zinc as an example, SMM learned that the current zinc market is showing a dual increase in supply and demand. On the supply side, domestic imports of zinc concentrates and refined zinc have increased YoY, with TC rising and sulphuric acid prices moving higher, increasing smelter profits, and significantly reducing the number of maintenance shutdowns, gradually realizing additional smelting output. On the consumption side, downstream zinc consumption is currently in a recovery phase, with the downstream sector gradually entering the peak consumption season since late March, and export orders for galvanized structural components performing well. By segment, in the galvanizing sector, SMM recorded an operating rate of 60.64% last week, up 1.43 percentage points WoW. For die-casting zinc alloy, after earlier production halts depleted inventories, companies resumed normal production, and lower zinc prices last week spurred terminal procurement, resulting in a recorded operating rate of 58.1%, up 0.46 percentage points WoW. In the zinc oxide sector, under the backdrop of lower zinc prices last week, downstream demand improved, with the operating rate of zinc oxide producers reaching 60.62%, up 0.22 percentage points WoW.》Click to view SMM database In terms of inventory, according to the latest SMM data, as of March 24, the total social inventory of zinc ingots in seven regions was 128,900 mt, down 2,100 mt from the previous Friday, continuing the destocking trend and remaining at a relatively low level compared to historical data. Therefore, the gradual improvement in consumption, coupled with low inventory levels, provides some support for zinc prices. However, it is also necessary to pay attention to the potential pressure on zinc prices from the supply side as smelter profits improve. SMM will continue to track whether the thallium pollution incident in Hunan will affect the production of local mines and smelters.