China announces massive cut in zinc smelting capacity

BEIJING (Scrap Monster): The latest report published by the Shanghai Metal Exchange suggests that the country is likely to eliminate nearly 500,000 mt per year of high cost zinc smelting capacity during the current year. The move is considered to be part of the government’s efforts to cut production capacities and inventories. The Chinese government had announced a series of structural reforms to restrict zinc oversupply and to lower the production cost of the metal.

According to China Nonferrous Metals Industry Association, close monitoring of the country’s smelting capacity is required to prevent capacity surplus. The industry need to implement strict cost control measures to compete with other producing countries. During recent years, energy and labor costs have escalated. The authorities have raised the tax burden, thereby hitting the profit margins of companies. Many smelters are found to be operating at loss. The Association called upon smelting sector companies to implement necessary measures so as to cut cost of operation at smelters.

Meantime, the zinc sector report released recently by the state-owned metals consultancy Beijing Antaike predicts the country’s refined zinc surplus to widen in 2016 when compared with the previous year. As per Antaike report, the zinc surplus is expected to increase from 451,000 mt in 2015 to 670,000 mt this year. The refined zinc demand is expected to increase marginally from 6.28 million mt in 2015 to 6.3 million mt in 2016. Also, the country’s refined zinc output is expected to rise marginally by 3% from 2015 to 6.4 million mt during the current year.

The latest SMM data indicates that the combined zinc inventories in Shanghai, Tianjin and Guangdong dropped 4,300 tonnes to 291,200 tonnes during the past week.