China Zinc Smelter May Shut for Two Months After Toxic Spill
2005-12-23 03:40 (New York)
By Helen Yuan and Koh Chin Ling
Dec. 23 (Bloomberg) -- Shenzhen Zhongjin Lingnan Nonfemet
Co., China's third-biggest zinc producer, may shut its zinc and
lead smelter in southern China for at least two months after a
toxic spill in a nearby river, according to traders and analysts.
The company halted production at its Shaoguan Smelter in
Guangdong province on Dec. 21 after it discharged excessive
amounts of cadmium, a poisonous metal, into the Beijiang river
during maintenance work, it said today.
``The suspension will hurt sales in 2006,'' the company
said in a statement to the Shenzhen Stock Exchange. The stoppage
could last for at least two months, according to Jin Haiming, a
lead and zinc analyst with Beijing Antaike Information Co., a
state-run research organization.
The spill comes six weeks after an explosion in northern
China at a plant belonging to a PetroChina Co. unit. This caused
100 tons of benzene and other toxic chemicals to leak into the
Songhua River, forcing cities to stop water supplies for days.
The spill spread to the Russian city of Khabarovsk.
Zhongjin Lingnan shares fell 3.4 percent to close at 6.51
yuan today on the Shenzhen Stock Exchange as trading resumed
after a two-day suspension. The shares are down 6.7 percent
since Dec. 19.
The Shaoguan Smelter, also the country's fourth-largest
producer of lead, has a capacity of 240,000 tons of zinc and
lead per year, its Web site says. Zinc is used to strengthen
steel for car bodies. Lead and cadmium are used in batteries.
``We will try to keep profit stable next year because of
the favorable outlook for concentrate sales,'' the company said.
Concentrate is the raw material used to make zinc and lead.
Force Majeure?
Tim Tu, President of United Metals Enterprise, a metal
trading company in Taiwan, said a suspension lasting two to
three months would probably prompt the smelter to declare force
majeure and renegotiate contracts.
A company declares force majeure when an uncontrollable
event means it cannot fulfill a contract.
``The premium that buyers pay smelters over zinc prices on
the London Metal Exchange is set to rise further because of the
production halt,'' said Tu.
The price of zinc for three-month delivery rose 2.7 percent
to $1,895 a ton on the London Metal Exchange yesterday. Prices
have gained 52 percent this year because global supply lags
behind demand fueled by China, the fastest growing major economy.
Zhongjin Lingnan said it halted production to comply with a
request from the provincial government.
China started inspecting companies located along major
rivers and tributaries after the explosion at a PetroChina unit
on Nov. 13. The checks in provinces including Sichuan, Guangdong,
Shandong and Hubei will last until Jan. 30, according to the
State Environmental Protection Administration.
Response Plans
Provincial governments are required to formulate emergency
response plans for spills by the end of this year and to shut
plants that fail to improve environmental safety practices, the
administration said.
Cadmium discharged by the Shaoguan Smelter was 10 times
above the safety level, the state-owned China Daily said
yesterday, citing a government statement. Cadmium, extracted
during zinc and lead production, can damage the central nervous
system or cause cancer, it said.
Guangzhou, capital of Guangdong province about 140
kilometers (85 miles) north of Hong Kong, and neighboring Foshan
implemented emergency measures to ensure sufficient drinking
water after the spill.
The pollution prompted Yingde city, which has 100,000
residents on the Beijiang river, to close part of its water
supply for several hours on Dec. 20, the newspaper said.
Suspension
Shaoguan Smelter and all other local smelters have been
ordered to close, the Guangdong Environmental Protection Bureau
said on its Web site today. The government has suspended the
head of the Shaoguan Smelter.
The stoppage won't hurt Zhongjin Lingnan's profit in 2005,
the company said today. Zhongjin Lingnan said Oct. 24 it
expected its 2005 profit to rise more than 80 percent from 137
million yuan ($17 million) last year on higher prices.
The company produced 65,300 tons of lead concentrates,
133,056 tons of zinc concentrates, 229,263 tons of refined zinc
and zinc products and 99,816 tons of lead in the first nine
months of this year, according to a company statement.
Zhuzhou Smelter Group Co., the nation's biggest zinc
producer located in central China, made 301,800 tons of the
metal last year. Huludao Zinc Factory, the second-largest and
sited in northern China, produced 243,100 tons, according to
Beijing Antaike.
No Choice
The Shaoguan Smelter had no choice other than to shut
because of government orders, said Wang Jianjun, general manager
of Hunan-based Zhuzhou Smelter Import & Export Co.
``It may have to shut for as long as several months,
because China is attaching greater importance to environmental
protection,'' Wang said. ``The public is paying attention.''
Huang Jianmin, a spokesman at Zhongjin Lingnan, didn't
return calls seeking comment.
--With reporting by Yanping Li in Beijing and Chia Peck Wong in
Singapore. Editor: Poole |
