[Zn] CBI Survey - Operating Rates at Zinc Smelters

SHANGHAI, Apr. 13 (CBI China) -- A recent CBI survey of 36 zinc smelters (total capacity: 3.91 million mt/yr) revealed the following insights:

    1) Operating Rates

    According to the survey, output at the 36 zinc smelters during March was 238 kt, with average operating rates 72.9%, up 10.1% from February levels. Operating rates at smelters with capacity between 20-100 kt/yr were 49.4%, flat at February levels. Operating rates at smelters with capacity of 100-150 kt/yr (including 100kt and 150kt) rose by 18.7%. Operating rates at smelters with capacity greater than 150 kt/ yr increased by 12% compared to February. Several reasons were behind these changes.

    1. Overall increases in operating rates at smelters were from increases at medium sized smelters (100-150 kt/yr). CBI believes these increases in output were the result of the zinc reserve plan proposed by Shaanxi government.

    2. According to the survey, operating rates at large smelters (greater than 150 kt/ yr) maintained a growth rate of 12% during 1Q, and the current operating rates of 87% at large smelters exceeded the operating rates of 84% during August and September in 2008 for the first time. Rising zinc prices and the national reserves program contributed to the increases in the operating rates at the large smelters.

    2) Inventory

    Currently, large and medium size zinc smelters were busy completing reserve commitments, leaving limited spot supply in the market. Existing inventories at factories were also limited, and in some cases, zero. According to the survey, smelters with limited or zero inventories account for 42% of the total survey smelters.  Smelters with approximately 1kt of inventories account for 47%. Smelters with 10kt of inventories account for only 11%, and consisted mainly of medium and small size smelters.

    3) Forecast of Zinc Prices in 2Q

    According to the survey, 28% of smelters believe zinc price will move around RMB 12,000/mt, while 36% of smelters believe zinc price will hover around RMB 13,000/mt. These two groups make up 64% of smelters who believe zinc price will fluctuate at higher levels during 2Q. 14% of smelters believe zinc prices will rise significantly and may reach RMB 15,000/mt. 11% of smelters believe zinc price will plunge to RMB 9,000/mt due to soaring supply, and the remaining 11% of smelters were uncertain about the price outlook. From the survey, CBI believes most large smelters were more cautious about the market outlook than medium and small smelters.

    4) New Projects

    According to the survey, the directors of Zhuzhou Smelter Group Company and Guangxi Hechi Nanfang Non-ferrous Metal Smelt Company said they will maintain stable due to uncertainties in zinc market this year, so their newly built zinc projects (100 mt/ yr and 120 mt/ yr) will be defer to 2010. As of the date, 320 mt/ yr of capacity have been deferred to 2010, and the total newly increased project will be 590kt.

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