[Zn] Impact of Metal Reserves Program in Hunan Province on Zinc Market Will be Limited

SHANGHAI, Apr. 15 (CBI China) -- On April 13th, Hunan Nonferrous Metals decided to spend RMB 1.2 billion on metal reserves plan from its smelters. The non-ferrous metal industry faced unprecedented challenges and tests due to financial crisis in Hunan province, such as the non-ferrous metal prices fell sharply, exports have suffered serious resistance, the profit of enterprises experienced obvious declines and the production and operation were very difficult.

    The reserves program is the way that the provincial government helped the smelters to respond to the financial crisis actively. In order to actively respond to the international financial crisis, and help its smelters weather the difficulties, Hunan Nonferrous Metals decided to spend RMB 1.2 billion loan from the bank purchasing five kinds of non-ferrous metals including lead, zinc, tungsten, antimony and indium as metal reserves, and will sell them when the price picks up.

    CBI believes the reserve plan in Hunan province is another substantive reserves program after Yunnan, Guangxi and Shaanxi province. However, currently only the total value of reserves and the types of non-ferrous metals involved in the reserves program were fixed, the way, quantity and price of reserves remained unknown, leaving limited stimulus in the market. 

    In the long run, CBI believes although the reserves program will exert impact on the spot supply in the market, the impact of the reserves within the province on the supply will be relatively limited. The subsidiaries of Hunan Nonferrous Metals include Zhuzhou Smelter Group Co., Ltd. with zinc capacity of 400 kt/yr and Shanxing Stibium Industry Co., Ltd. with zinc capacity of 35 kt/ yr, accounting for 8.9% of Chinese total capacities. Zhuzhou Smelter always takes up a certain proportion in the spot market, and the two reserves programs proposed by State Reserve Bureau failed to exert great influence to the resources of Zhuzhou Smelter in the spot market; in the mean time, the zinc output at Shanxing Stibium Industry is relatively limited, leaving even less impact in the market.

    In this context, CBI believes the impact of reserves program carried out by Hunan Nonferrous Metals on zinc market will be limited.

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