Zinc

[Lone Clone]

China's Zinc and Lead Output to Rise 15% in 2007

By David Harman
18 Apr 2007 at 09:09 AM GMT-04:00

http://www.resourceinvestor.com/pebble.asp?relid=30972

SHANGHAI (Interfax-China) -- China will produce 3.15 million tonnes of refined lead and 3.6 million tonnes of refined zinc in 2007, up roughly 15% respectively from the previous year, a senior industry official said yesterday.

The prediction was made by Zhou Guobao, director of the China Nonferrous Metals Industry Association Zinc and Lead Branch at the 3rd China Non-Ferrous Metals Industry Chain Development Forum held yesterday in Beijing, cited by the state-run media China Nonferrous Metals News.

Zhou also forecasted an apparent consumption of refined zinc 3.7 million tonnes in 2007, up 10% year-on-year; while lead consumption is expected to climb 10% to 2.5 million tonnes this year.

According to his prediction, lead concentrate and zinc concentrate production are anticipated to grow 18% to 1.59 million tonnes and 3.40 million tonnes respectively in 2007.

Zhou attributed strong lead and zinc production growth this year mainly to a continous growth on domestic consumption, lead & zinc mines' output hike, a comparatively stable domestic market from luanch of zinc futures trade, increase on zinc prices under restricting policies for smelting capacity and exports.

Increased domestic demand in 2006 pushed up lead and zinc prices and stirred an increase in investment and output in the zinc and lead sectors.

Last year, lead output reached 2.74 million tonnes, up 15% from the previous year and zinc output reached 3.15 million tonnes, up 16% from 2005.

Jia Yinsong, a senior official with the National Development and Reform Commission (NDRC), stressed in the same conference that the state would upgrade the zinc and lead sector through a number of means, such as raising industry requirements, strengthening supervision and administration by regularly publishing a list of qualified zinc and lead manufacturers, enhancing controls on land, loans, environment protection and safety.

In order to maintain a demand and supply balance in the zinc and lead sector, Chian is making efforts to control redundant investment in lead and zinc smelting sectors.

By 2010, after the elimination of out-dated capacity, domestic refined lead capacity is set to be reduced to 4 million tonnes and zinc capacity to approximately 5 million tonnes. Recycling zinc and lead will be encouraged with an aim to increasing the consumption of recycled resources to 30% of total annual consumption.

The NDRD also said that China aims to produce 193 million tonnes of oil and 92 billion cubic metres of natural gas by 2010.

Zinc Futures ended up on the Shanghai Futures Exchange on Wednesday amid speculative buying, in line with overnight gains on LME. The most traded July delivery gained RMB 1290 ($167.02), closing on Wednesday at RMB 33,590 ($4,348.90).

"Zinc futures will fall sooner or later, considering the sufficient supply in the domestic physical market," analyst Lu said. He added that spot prices were RMB 2,000 ($258.94) lower than futures prices.

There is a market concern that China will cancel the export tax rebate on 0#zinc ingots, grade ≥99.995 percent this year, which might further weigh on zinc future prices, according to some analysts.

Commentary

Phasing out of smaller smelters and secondary producers, coupled with a proposed 35% liquid asset requirement, if enforced, will further consolidation.

However, domestic demand is growing at a faster rate than output and will continue to bring upward pressure on prices. For example; zinc output is expected to reach 3.60 million tonnes, yet estimated consumption is 3.75 million tonnes.

Higher international prices, with lead hitting record levels and zinc enjoying a strong bull run, might encourage exports but 1) this can only be achieved through export of finished products; 2). China has taken strong measures to curb such exports in recent months.

© Interfax-China 2007.

This article comes from Interfax China Commodities Daily, a daily digest produced by Interfax News Agency in Mainland China. To receive 10 free copies of this, please e-mail [e-mail].