2009 hasn't brought any good news China's zinc smelting industry. Sources say that as zinc mines are unwilling to sell, metallurgical plants have become increasingly dependent on overseas resources. As a result, the processing charges of imported zinc in metallurgical plants have declined to USD 90 per tonne.
Mr Cheng Qingang, president of Xizang Zhufeng Industrial Co Ltd said "The processing charges we settled down in our agreement with traders were USD 120, but the charges in our most recent agreement have come down to USD 100. He said although they have some zinc concentrate now, current zinc price is too low for them to sustain the mining and dressing business, so it has been relying more and more on imported resources since Q3 of the last year.”
Excessive reliance on importing zinc resources is seen not only in this enterprise. The secretary of the import and export department of Henan Yuguang Gold and Lead Group also confessed its improper proportion between domestic and overseas zinc, which remains at 45:55. Customs statistics also indicate that imports of zinc ore and zinc concentrate in last Dec surged by 78.08% m-o-m and reached 262,800 tonnes.
Some enterprises have even pushed the processing charges of imported zinc ore to as low as USD 90 per tonne and lead processing charges to USD 50-60 per tonne. In 2007-2008, the processing charges of zinc stayed as high as USD 160 per tonne to USD 170 per tonne.
Mr Jin Haiming a researcher from a security company said that "The price has already approached the product cost of metallurgical plants.... the processing charges of domestic resources have also come down to CNY 4,500 per tonne making it approximate to the smelting cost. This put one third of private enterprises on the verge of breaking their financial chains.”
Foreign media said earlier this month that metallurgical plants in the US had settled basic terms their 2009 zinc processing agreement with zinc mines at USD 194 per tonne on the basis of the zinc price being USD 1,250 per tonne.
Such a large gap between foreign and domestic charges is believed to be caused by that fact that there are no long-term zinc ore contracts between China's zinc enterprises and foreign zinc ore, and that China's enterprises have to purchase spot resources when they need it. Large profits are therefore earned by traders, and domestic metallurgical enterprises can only make their living by slender processing charges.
Source: Steel Guru
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