London 20/11/2015 - A group of Chinese zinc smelters has agreed to lower production next year by a combined 500,000 tonnes or around 3.5 percent of world production, they said.
The cuts to production are part of a move to "strictly control new capacity to avoid overcapacity" they said in a statement on Friday.
"The participating companies believe that the current market price level does not reflect industry fundamentals, causing difficulties for businesses" they said.
Chinese zinc smelters will combine to form a joint working group in the same way that the largest Chinese copper smelters are part of a trade group that controls output and acts as a commercial block in annual concentrate purchasing negotiations, they added.
The smelters that have signed up to the agreement are Zhuzhou Smelter Group, MCC Huludao Nonferrous Metals Group, Shenzhen Lingnan Nonferrous Metals, Henan Yuguang Zinc Industry, Yunnan Chihong Zinc and Germanium, Hanzhong Zinc Industry, Baiyin Nonferrous Metals Group, Shaanxi Dongling Group, Southern Guangxi Nonferrous Metals and Chifeng Zinc Industry.
The news has propelled zinc prices higher - three-month LME zinc $1,600 per tonne, up $69 on Thursday's close and a rise of seven percent from the previous day's lows - it had broken below $1,500 for the first time in seven years. Still, it is down five percent since the start of the month.
The announcement of the cuts is the latest in a line of substantial reductions to zinc production worldwide, adding to Glencore's October announcement that it would look to cut production by 500,000 tonnes and Nyrstar's notice last week that it is considering stemming 400,000 tonnes per year of mined production.
(Additional reporting by Ian Walker, editing by Mark Shaw)