Net Zinc Exporting on Horizon

BEIJING, July 7 -- China may become a net exporter of zinc beginning this year as smelters step up production as a result of higher prices, Morgan Stanley said.

    The country's exports of zinc may reach 500,000 metric tons in 2010, moderating to 430,000 tons in 2011 and 300,000 tons a year after that, analysts at the bank led by Peter Richardson wrote in a report this month. No estimate for 2009 was given.

    China, the largest producer and consumer of zinc, had net imports of 111,000 tons last year, according to Bloomberg data. Refined zinc imports jumped more than six-fold to 412,239 tons in the first five months this year, compared with exports of 4,188 tons, as the government increased purchases to boost stockpiles.

    Zhang Shuijian, deputy chairman of China Nonferrous Metals Industry Association (CNIA), said China's non-ferrous industry is set for a metamorphosis with the government favoring consolidation of small companies.

    "The country also expects to wash out small zinc and lead plants with annual production capacity of no more than 400,000 tons in three years," Zhang said.

    Sliding prices of lead and zinc will also force some small refining enterprises to close, he said.

    Despite shrinking profits for lead and zinc enterprises, some large groups like Zhuzhou Smelter Group Co, Shenzhen Zhongjin Lingnan Nonfemet Co, Henan Yuguang Gold and Lead Co still have plans to expand production.

    China's State Council has approved in principle a raft of policies, including investing in overseas resources, assets and companies, to encourage growth in its base metals sector, which includes metals other than iron such as copper, aluminum, lead and zinc.

    China's 15 key lead and zinc producers witnessed a 91 percent profit slump in 2008, according to CNIA.

    The association said this March that the annual profit of 15 key lead and zinc enterprises was only 840 million yuan last year due mainly to collapsing prices of lead and zinc since the end of 2007.

    Their combined operating turnover was 65.74 billion yuan in 2008, down 21.94 percent on year, while the sales margin sank 88.54 percent to 1.28 percent, said CNIA, which added that in the fourth quarter of 2008 alone, the 15 metal smelters suffered a total loss of 2.67 billion yuan.

    In spite of the gloomy profit results, China launched construction of 480 lead and zinc mining projects with total investment of 13.17 billion yuan in the quarter, up 15.98 percent over the same period the year previous.

    According to CNIA estimates, the country increased zinc and lead production capacity by 400,000 to 500,000 tons last year, adding to the total of more than 4.6 million tons.

    (Source: Agencies)