Zinc

[Lone Clone]

China to Become Net Zinc Exporter This Year

By Interfax-China
31 May 2007 at 09:37 AM GMT-04:00

http://www.resourceinvestor.com/pebble.asp?relid=32414

SHANGHAI (Interfax-China) -- China is set to become a net exporter of refined zinc this year, due to oversupply pressure and a slowdown in domestic demand, a Chinese zinc expert told Interfax at the China International Nonferrous Metals Market Conference 2007, held in Hong Kong yesterday.

Despite the Chinese government's decision to introduce a 5% export tax on 1# zinc (>=99.99% and <99.995%) on Nov. 1, 2006 and increase the export tax on refined zinc (2# zinc <99.99%) from a current 5% to 10%, effective June 1, the country will remain a net zinc exporter for the rest of the year, Feng Juncong, a zinc expert with Beijing Antaike Information Co. Ltd., a mining and metals information provider affiliated with China Nonferrous Metals Industry Association, told Interfax.

China returned to net zinc importer status in April this year, after maintaining net exporter status for nearly six months since October last year.

"There will be no change in the 5% value-added tax (VAT) rebate on 0# refined zinc (>=99.995%), which makes up over 65% of China's zinc exports. As a result, we will not see a significant reduction in zinc exports this year," Feng said.

China's zinc oversupply will reach nearly 200,000 tonnes this year, she forecasted.

Based on first quarter production levels, the average monthly production this year will be up 30,000 to 40,000 tonnes from 2006. Domestic consumption is also set to increase 270,000 to 280,000 tonnes this year, from 3.39 million tonnes in 2006, she said

"China produced 3.15 million tonnes of refined zinc in 2006, at an average rate of 260,000 tonnes per month. However, zinc smelting capacity reached 4.3 million tonnes last year. In the past seven years, China's zinc smelting capacity has grown on average 12.8% each year. We predict growth to continue to climb until 2010, when China's total zinc smelting capacity will reach 5.8 million tonnes, up 45.7% from 2005," she said.

China's rapid capacity expansion has been mainly driven by rising zinc prices, technological upgrades and government policies that encourage new projects above 100,000 tonnes in annual capacity, she explained.

China's zinc consumption slackened in August last year, due to pressure from increasing zinc prices. Actual consumption growth decreased from 15% in 2005, to 9.8% last year.

According to her predictions, China's zinc consumption will remain at 7.6% between 2007 and 2010, during which domestic zinc consumption will exceed 4.7 million tonnes.

She further predicted domestic zinc spot prices would fall to RMB 26,000 ($198,874.00) per tonne in the second half of this year, due to a slowdown in domestic consumption and an eased zinc concentrate supply. The benchmark spot price for 0# refined zinc was RMB 30,100 ($230,234.90) per tonne yesterday on the Shanghai Yangtze River Nonferrous Metals Market.

China's zinc concentrate production amounted to 2.84 million tonnes in 2006, up 10.9% from 2005 while the annual average growth rate was 7.2% from 2000 to 2005.

Zinc futures closed higher on speculative buying after zinc fell 1.5% to $3,595 per tonne on the LME overnight, despite a 16-year low of LME stocks.

However, zinc futures will continue to remain weak compared to the foreign markets due to Beijing's curbs on exports, said analysts.

A rumour that tax rebates on 0# zinc exports might be lowered soon might send a bearish signal to the domestic market.

© 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].