Impact from Freezing Weather in North China on Zinc Market

SHANGHAI, Jan. 8 (SMM) -- Recently, the heavy snowfall occurred in north China, and the freezing weather is expected to continue in next 10 days, which will directly affect the normal life throughout north China. In the mean time, the freezing weather in north China will directly affect ore mining at lead and zinc mine operators, and it seems that zinc smelters with raw materials sourced from these mine operators and selected zinc smelters in north China will be affected negatively as well.

However, according to SMM sources, zinc concentrates produced by domestic lead and zinc mine operators and previous zinc concentrate inventories held by traders and producers have flowed into market due to rising zinc prices since 4Q 2009, and raw material stocks at zinc smelters were relatively sufficient as a result. In this context, although the heavy snowfall in early 2010 affected normal production of selected mine operators, any impact on zinc smelters was very limited.

In other news, fresh agricultural products and coal for power generation enjoy the priority of transportation due to freezing weather in China, in turn limiting transportation capacity for zinc ingot, and delaying deliveries of goods to Tianjin, Hebei, and other major trading regions in north China. In addition, a portion of zinc smelters were reluctant to sell goods upon their optimistic market outlook, also reducing market supply of spot goods. In the context, zinc inventories in Tianjin experienced declines. However, operating rates in construction and other industries fell due to soaring zinc prices and freezing weather, resulting in orders declines from galvanizing and other zinc downstream industries, signaling zinc demand was waning. In general, zinc supply experienced declines, and zinc demand dropped as well, so any actual impact from freezing weather on zinc market will be limited. 

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