Shanghai 27/12/2016 - By Anna Xu
China’s Chihong Zn&Ge has decided to shut two zinc smelters, each with an annual capacity of less than 30,000 tonnes, while planning to upgrade another small smelter to a capacity of 50,000 tpy, the company announced on Monday December 26.
The company owns six lead and zinc smelters with a total annual capacity of 402,000 tonnes of electrolytic zinc, 230,000 tonnes of electrolytic lead and 60,000 tonnes of crude lead.
Chihong Zn&Ge attributed the shutdowns to the low capacities and high costs of the two small smelters, Yunnan Lancang Lead mine and Daxing’anling Yunye Mining Development, which have a combined total capacity of 40,000-tpy of electrolytic zinc and 10,000-tpy of electrolytic lead.
According to China’s 'Lead and Zinc Industry Standard Conditions’, existing zinc smelters must have a capacity of more than 30,000-tpy.
"In order to strengthen the supply side reform and actively dissolve the excess capacities in lead and zinc industries, [Chihong Zn&Ge] intends to shut down the 20,000-tpy zinc plant in [Daxing’anling Yunye] and the Lancang Lead Mine Smelter with [a capacity of] 20,000-tpy of zinc and 10,000-tpy of lead, in addition, we intend to upgrade the facility of Yongchang Lead&Zinc Smelter and improve its capacity to 50,000-tpy from [the current] 22,000-tpy to meet the industry standard conditions," Chihong Zn&Ge said.
Market sources believe that Chihong Zn&Ge is halting production at the two small plants amid declining treatment charges due to the tight supply of zinc concentrates and high production costs caused by low raw material self-sufficiency rates at the respective plants.
Treatment charges are fees paid to smelters by miners to covert zinc concentrates into refined zinc.
"More small zinc smelters which [do] not comply with the 'Lead and Zinc Industry Standard Conditions’ or [those] with high costs will follow suit owing to fierce competition for zinc concentrates next year," an analyst in Shanghai said.
(Editing by Kyle Docherty)