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Analysts estimate that power constraints have led to the closure of 500000 tons of zinc smelting capacity in China


Published:

2022-11-25

On August 20, foreign media reported that CRU Group, a consulting company, said on Friday that China's power restrictions had led to the closure of zinc smelting capacity of at least 500000 tons per year, equivalent to the closure of 5000-6000 tons per week.

On August 20, foreign media reported that CRU Group, a consulting company, said on Friday that China's power restrictions had led to the closure of zinc smelting capacity of at least 500000 tons per year, equivalent to the closure of 5000-6000 tons per week.

In Sichuan Province, which suffered the worst heat wave in 60 years, industrial enterprises suspended production from August 15 to August 20 to give priority to ensuring the power supply of residents. Since the beginning of last week, all zinc smelters in Sichuan have stopped production, and a small smelter in neighboring Hunan has also stopped operation in the following days. CRU Group analysts estimate that the total capacity affected by the shutdown is at least 500000 tons/year.

Previously, European aluminum smelters also announced that they would stop production because of high energy prices, which led to high operating costs.

At the beginning of last week, Nyrstar, a subsidiary of Trafigura Group, said that from September 1, the Buder zinc smelting business in the Netherlands would be shut down for maintenance. Nyrstar, previously headquartered in Belgium, has cut the output of its three European zinc smelters by 50% because of the high cost of electricity. This news pushed LME's three-month zinc contract on Tuesday to a two month peak of US $3819/t.

CRU analysts said that the shutdown in Sichuan is only temporary, and the scale of the shutdown is only a small part of China's nearly 7 million tons of production capacity. According to the data of Antaike, in July, Sichuan produced 350000 tons of refined zinc, which is 8.6% of China's total output of 408000 tons that month.

On Friday, the zinc warehouse receipt in the delivery warehouse of Shanghai Futures Exchange was 96206 tons, up 10.4% from 87180 tons a week ago. Aetna forecasts that, based on the latest production interruption and improved demand, the global zinc market will have a supply gap of 200000 tons.

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