China zinc smelters cut sales, expect prices to rise
news.alibaba.com
Editor: Eve Guo
12 Dec 2008 06:03:25 GMT
HONG KONG, Dec 12 - Chinese zinc smelters have slashed sales of spot metal after prices lost 30 percent in the past three months to fall below production costs, despite efforts to slow output.
Now smelter officials expect prices to rise as the central government, keen to boost domestic consumption, is likely to start buying refined zinc soon to build up reserve stockpiles.
Beijing is expected to buy 100,000-300,000 tonnes of refined zinc at prices of 11,000-12,000 yuan per tonne for its reserves, an industry source said.
"Large smelters have reduced their offers in Shanghai," said a sales manager at a large trading house that also operates a small zinc smelter. "It is supporting prices a bit although demand remains weak."
Demand from galvanized steel producers, the country's top zinc users, has not increased, even though Beijing's stimulus plan covers infrastructural projects that use such steel, he added.
China's investment in fixed assets in urban areas such as roads and factories rose 27.2 percent in the first 10 months of the year over the corresponding 2007 period, down slightly from 27.6 percent in the first three quarters.
"The current zinc prices are below production costs to smelters," said a trade manager at Zhuzhou Smelter, China's top zinc producer and the world's biggest.
Zhuzhou has cut production by a third at its 400,000-tonne zinc facilities since November, and the firm would maintain the cut through the first quarter of 2009, he said.
Zhuzhou's new 100,000-tonne-a-year zinc plant had not started commercial production, he added.
China's top lead producer, Yuguang Gold and Lead, has shut a 100,000-tonne-a-year zinc facility since November and another 100,000-tonne-a-year zinc plant is operating normally, a sales manager said.
Resumption of production at the zinc facility would depend on how much metal the government wanted to buy as reserves, since the move might push up prices to 12,000 yuan a tonne.
Spot zinc traded in Shanghai at about 9,350 yuan a tonne on Thursday versus 13,850 yuan 3 months earlier.
The central government is considering buying all types of base metals, including zinc, as reserves to help boost domestic demand and save jobs. The government of Yunnan province also plans to buy metal from local smelters.
About 300,000 tonnes of zinc is now estimated to be sitting in private and public warehouses and smelters' yards, smelter officials and traders said.
"We just bought zinc futures in Shanghai," a Shanghai-based trader said. "We believe prices will rise. We are not interested in physical zinc because of the 100 percent payment requirement." (Editing by Clarence Fernandez) |
