Zinc concentrate shortage eases on price recovery
Shanghai. February 13. INTERFAX-CHINA - China's zinc concentrate supply shortage has eased this year following a recovery in prices of the refined metal, Shanghai Metal Market (SMM) analyst Shen Yili told Interfax Monday.
About 30.3 percent of China's 43 major zinc smelters reported a shortage of the feedstock in January, an improvement from the second half (H2) of 2011, according to recent SMM figures.
Zinc prices have been on the rebound since December, encouraging miners to sell more of their output and increasing market supplies, said Shen.
China's zinc concentrate output grew 3.17 on the month in January to 449,000 tons, according to data from the China Nonferrous Metals Industry Association (CNMIA).
Miners were reluctant to sell in H2 amid low prices, which bottomed out at RMB 14,200 ($2,258) per ton at the end of October - below domestic production costs of about RMB 15,000 ($2,385) per ton.
Prices have since bounced back to around RMB 16,000 ($2,544) per ton, but the recovery was limited by concerns over Greek sovereign debt, which offset the effects of positive data from the U.S. in recent months, Antaike analyst Fan Jiaqi told Interfax.
Meanwhile, China's inflation worsened in January, with the consumer price index (CPI) growing 4.5 percent year-on-year - above market expectations of about 4.1 percent. This suggests a relaxation in bank reserve requirement ratios is still some way off and the credit problems affecting the industry are unlikely to ease in the near-term, said Fan.
Zinc miners are unlikely to expand production significantly in Q1, the analyst added.
Fan expects benchmark three-month zinc contracts on the London Metal Exchange (LME) to hover around $2,050 to $2,250 per ton in the next few weeks, while Shanghai Futures Exchange (SHFE) contracts will trade slightly higher at RMB 15,500 ($2,464) to RMB 16,500 ($2,623).
- GD