China Zinc Production Begins Recovery

Chinese zinc smelters have increased production as zinc prices appear to have found a bottom, Liu Fan, a zinc analyst said in Beijing on Thursday.

Smelters cut production to around 70% of capacity in November and December, against an average of 81.5% of capacity for 2008.

"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 the larger smelters, Huludao Zinc Industry Co.'s cuts were negligible in 2008, said Liu, while Zhuzhou Smelter Group cut about 15,000 tons of output. 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.

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

Liu estimated that zinc smelters produced 3.91 million tons in 2008 out of aggregated capacity of 4.8 million tonnes. In 2007 they produced 3.74 million tons, or 85% out of a 4.4-million-ton capacity.

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.

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.

Source: Dow Jones