China’s zinc smelters tighten grip as global rivals struggle
Supplies from Russia in particular have surged, more than doubling in the first seven months
[BEIJING] China’s zinc producers are pushing for better supply terms from overseas miners as they benefit from smelter closures elsewhere in the world.
Spot treatment charges for zinc concentrate delivered to China, a key indicator of smelter profitability, have improved markedly since the start of the year, rising from subzero levels to their highest in more than 18 months. Meanwhile, harsh conditions in the global market have forced production cuts, including in Japan and Australia.
Now, the group that negotiates overseas supplies is aiming for treatment fees of US$120 to US$140 a tonne in the fourth quarter, state-backed researcher Beijing Antaike Information Technology said. Spot fees climbed above US$80 a tonne at the end of last month, Fastmarkets data shows.
Mine output is “relatively smooth this year and is increasing at a high rate”, resulting in looser supply, said Zeng Tong, an analyst at Jinrui Futures. Supplies from Russia in particular have surged, more than doubling in the first seven months.
The dynamic in zinc, a metal used to galvanise steel, mirrors developments in copper, where China’s tightening grip on global supply is worrying competitors and governments. This year’s annual benchmark for zinc treatment charges outside of China slumped to the lowest ever in inflation-adjusted terms, at US$80 a tonne.
Last month, Trafigura Group’s zinc subsidiary won state funding to prevent the closure of a smelter in Australia in the face of tougher competition from China.
China’s output of refined zinc in the first seven months of the year hit a record, while the country’s imports of zinc concentrate in July also rose to their highest ever. Russia accounted for 12 per cent of those cargoes, behind Australia at 24 per cent and Peru at 18 per cent.
The bifurcation between Chinese and global markets is also increasingly obvious in prices, with levels on the Shanghai Futures Exchange steady since April, even as the international benchmark on the London Metal Exchange recovers. That underscores tight conditions outside China after smelting reductions: LME stockpiles fell this week to their lowest in more than two years.
“Under conditions where demand is relatively stable, there has been a focus on clearing inventories overseas this year,” said Jinrui’s Zeng. BLOOMBERG
