China's Shaoguan Smelter shutdown lifts zinc, lead prices

Hong Kong (Platts)--22 Oct 2010 727 am EDT/1127 GMT


The shutdown of the 350,000 mt/year Guangdong-based lead and zinc producer Shaoguan Smelter on October 21 lifted both Chinese zinc and lead prices Friday, Chinese zinc and lead industry experts told Platts, attributing the rise to speculative fund buying on the shutdown news. Average spot Chinese zinc prices in Shanghai hit Yuan 19,075/mt ($2,865/mt) Friday, up Yuan 200 from Thursday, while spot Chinese lead prices averaged Yuan 17,300/mt, up Yuan 25 from Thursday. The smelter's owner, China Shenzhen Zhongjin Lingnan Nonfemet Co., announced Thursday that it had closed the plant following the local government's discovery of excessive thallium discharges into the local river. The company did not give details of how long the shutdown would last, but revealed that the closure could incur a net profit loss estimated at Yuan 27 million/month. Zhongjin Lingnan is aiming to produce 420,000 mt refined zinc and lead this year. Through the end of September, the company reported total refined zinc and lead output of 312,300 mt. Zhongjin Lingnan officials declined to comment on the shutdown issue or reveal the refined zinc and lead output breakdown in the January-September period, when contacted by Platts Friday. A source close to Zhongjin Lingnan said: "Judging from the Shaoguan Smelter's shutdown, it's quite unlikely that Zhongjin Lingnan will reach its refined zinc and lead output target of 420,000 mt for this year." Chinese zinc industry analysts, however, see only a limited impact on zinc market supply from the smelter's shutdown. "Mainland China is expected to add total new zinc smelting capacity reaching 400,000 mt/year by end-2010, so overall speaking, it won't tighten zinc supply much," said a commodity analyst with a state-owned investment bank. "It's mainly fund speculation on the Shaoguan shutdown news that bolstered Chinese zinc and lead prices today," she added. A Sichuan-based commodity analyst said: "We see limited impact from the shutdown news on zinc supply. After all, China has a lot of zinc inventories Funds speculation may support a further rise in Chinese and international zinc prices, but only for a short period." He added: "If the Chinese government lifts lending rates later on this year or next year, it may weaken Chinese zinc demand, pressuring down domestic zinc prices later on." Zinc inventories at the Shanghai Futures Exchange hit 283,472 mt on October 22, up 1,066 mt from the previous week. --Joshua Leung, Similar stories appear in Metals Week. See more information at

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