Zinc smelters in China, the world’s biggest producer and consumer, may boost output next month as summer maintenance programs are completed, lifting utilization rates from the lowest level since March 2009, a researcher said.
A total of 41 smelters used 68 percent of their capacity in July, producing 282,000 metric tons, according to a survey by data-provider Shanghai Metals Market. “The overall utilization rate should rebound after mid-August,” Zhu Yiman, an analyst at Shanghai Metals, said by phone today.
The increased output may help zinc to extend a fall that’s made the metal the worst performer on the London Metal Exchange this year. Chinese smelters typically schedule maintenance over summer when demand dips. Zinc is used in galvanized steel.
“As September is approaching, the demand and production should come back,” said Wang Zhouyi, an analyst at China International Futures (Shanghai) Co. “Considering the hot weather and seasonally weak demand in July and August, the drop in the utilization rate is normal.”
Zinc in London has lost 16 percent this year as inventories climbed 27 percent to 619,950 tons. That compares with lead’s 11 percent fall, which makes it the second-worst performer. Three-month zinc traded at $2,146 a ton at 1:29 p.m. in Shanghai.
Total zinc production in China rose 27 percent to about 2.88 million tons in the first seven months of this year from the same period in 2009, according to data from the statistics bureau. July output was 405,000 tons from 425,000 in June.
Zinc Usage Rates
Smelters with capacity of more than 200,000 tons increased utilization rates in July as maintenance came to an end, Shanghai Metals Market said in a report dated Aug. 12. Rates at so-called small- and medium-sized smelters, which fell last month, are expected to climb from mid-August, it said.
Treatment fees for local concentrate containing 50 percent to 55 percent zinc were 4,800 yuan to 5,800 yuan a ton last week, up from 4,800 yuan to 5,500 yuan a week earlier. Fees for imported concentrate were $105 to $115 a ton, up from $100 to $110 a ton, according to the SMM report. A fee increase indicates cheaper ore and greater supply. The fees are deducted from the price paid by smelters to miners for the concentrate.
Zhuzhou Smelter Group Co., China’s largest zinc producer, traded at 10.49 yuan at 1:12 p.m. in Shanghai, declining 34 percent this year. Shenzhen Zhongjin Lingnan Nonfemet Co., the country’s third-largest producer, traded at 15.67 yuan, slumping 13 percent this year.
Goldman Sachs Group Inc. listed zinc among its top picks for the rest of the year, along with oil, gold, copper and platinum, as it maintained an “overweight” recommendation on commodities, according to an Aug. 13 report.