MELBOURNE: China's zinc imports surged in December as low prices have forced costly local mines out of business and as galvanisers hoovered up cheaper imported metal ahead of an expected shortfall later in the year, industry sources said.
China's imports of the metal used to rust proof steel have shown fresh signs of life over the past three months, suggesting that local mine closures will sow the seeds of a price revival later in the year.
The country's zinc imports surged 440 percent from a year ago to 94,434 tonnes in December, data on Tuesday showed, after imports nearly quadrupled in November and almost tripled in October.
London Metal Exchange zinc dropped 38 percent from its 2015 peak of $2,404.50 a tonne in May to $1,487.50 by mid-November, the lowest in six years, amid a global slowdown in metals consumption. Zinc has traded just above that level since then.
"As prices are low, people are buying," said analyst Matt Fusarelli of AME Group in Singapore.
"But I think it's also indicative of further production cuts, or expectations of production cuts in China. This is particularly good news for zinc."
China's miners and metals producers are in dire straits as prices tank and the country banks on building a service-led economy and away from manufacturing.
China's zinc concentrate production fell by 10.5 percent to 4.75 million tonnes last year, according to data from China's Ministry of Industry and Information Technology.
Chinese zinc mines have shut 10 percent of production at a minimum, due to low prices and tougher environmental regulation said a metals analyst at a trading house in Shanghai.
"The production loss on the domestic mining side is quite significant. For certain miners we have been dealing with, we see production down by 60-70 percent, mainly due to prices, environmental issues and the government delaying renewing mining licences."
Beijing will close 2,500 small polluting firms this year in its latest effort to combat pollution.
China's major zinc smelters said in November they would slash output by 500,000 tonnes this year, almost a fifth of their output as the industry tried to boost prices that had languished at six-year lows.
Globally, zinc production has been constricted as several blockbuster mines such as Australia's Century reach their end of life, with little new production in the pipeline. Major producer Glencore said it would hold back zinc output until prices recover, a major reason analysts polled by Reuters expect zinc to be a top performer this year.
Comments
Comments are closed.