China Zinc Smelters Revive Some Output As Prices Rise-Antaike

Published: Feb 10,2009 10:10:15



Zinc smelters are beginning to reduce their level of production cuts as zinc prices appear to have found a bottom, a zinc analyst with state-owned metals consultancy Antaike said Thursday.

Smelters cut production to around 70% of capacity in November and December, well below the average level of 81.5% of capacity for 2008, said Liu Fan.

"Going by the data, November was the worst month for production cuts," she said. "But from December output data, we can see some recovery.

January prices compared to December were also higher. This is where we see the basis for decreasing smelter cuts.

Among sizable smelters, Huludao Zinc Industry Co.'s production cuts were negligible in 2008, said Liu, while Zhuzhou Smelter Group was estimated to have cut about 15,000 tons of output last year.

She agreed with private sector estimates that Yunnan Luoping Zinc & Electricity Co. may have cut about 15,000 tons since November.

Officials at the three companies could not be reached for comment on these figures.

But Liu said smelters have been gradually restoring output since December.

Zinc prices on the Shanghai Metals Market continue to fluctuate but rose sharply in early January on the back of a wider commodities rally to CNY11,430/ton from lows that reached CNY9,200/ton in late October.

On the Shanghai Futures Exchange, the benchmark April 2009 zinc contract settled at CNY10,410/ton Thursday, up 12% from CNY9,275/ton in mid-December.

Liu estimated that zinc smelters produced 3.91 million tons or 81.5% of an aggregated capacity of 4.8 million tons in 2008.

They produced a slightly higher 85% of capacity in 2007, with output reaching 3.74 million tons out of a 4.4-million-ton capacity.

While November output reached about 300,000 tons, December's production increased to around 315,000 tons, Liu said.

Smelters produced an average of 325,000 tons a month in 2008, she said.

In January, zinc smelters produced around 300,000 tons, though she said the decrease from December should factor in the week-long Lunar New Year break.

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