SUPPLY NEWS - Padaeng to end zinc mining in August, stop refined production this year

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Archie Hunterarchie.hunter@fastmarkets.comDeputy Head of Physicals+44 (0) 20 7337 2143

London 30/06/2016 - Thai zinc producer Padaeng will close its Mae Sot Mine in August after its zinc reserves finally ran out and will end refined production of its LME brand ingots this year, FastMarkets understands.

The company said earlier this year that it would close its refining operations in 2017 but this has since brought forward that date.

Padaeng, southeast Asia's only refined zinc producer, is on track to smelt 70,000 tonnes of zinc this year, the same as in 2015, but it will stop producing zinc as of the end of the year, several sources said.

"The mine will be closed by August but there will still be some production from [concentrate] stock and some imports," a source with knowledge of the situation said.

Padaeng had attempted to acquire new licenses to mine zinc at other locations in Thailand but these were denied by government agencies.

While the company will have metal for sale in 2017 and will continue to produce silver and other by-products, but there will be no fresh production of zinc.

The end of zinc production at Padaeng is unlikely to cause a major shift in regional physical markets - the company is mainly focussed on servicing domestic consumers, sources said. But the drop in refined output is likely to contribute to the decline of warehouse stocks in the region, they added.

"Thai premiums should rise and it could help ease some warehouse stocks which are quite high at the moment," a zinc trader in the region said.

Spot premiums for zinc into nearby Vietnam are currently $140-150 per tonne on a cost, insurance and freight (CIF) basis, several sources said.

As well, the move is indicative of the current difficulties zinc smelters face to get raw materials while spot treatment and refining charges are falling globally on a shortage of mine supply.

"Smelter margins are narrowing - there are two pressures down on the TC and the physical premium, which will probably continue into next year," a source in the zinc industry said.


(Editing by Mark Shaw)



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