DJ China Assoc: Zinc Prices May Decline As Smelters Resume Ops

Zinc prices in China may decline in the second half with zinc smelters having restarted their production in recent months, fueling fears that the market could be in surplus again, said top industry officials over the weekend.

"The (zinc) prices could come down sharply... and we are not positive about the market situation in the second half," said Hu Deyong, a senior official with China Nonferrous Metal Industry Association in a metal forum.

Driven by recent price hikes, key Chinese smelters only cut about 10% of their capacity in April, compared with nearly 40% in January, said Hu.

According to data from the Shanghai Non-Ferrous Metals Network, spot zinc prices have risen to around CNY12,900-CNY13,000/ton after falling as low as CNY8,800/ton in early December.

"The main reason (for the price surge) was that the State Reserve Bureau started buying zinc from local smelters in December," said Hu.

Despite the latest strong auto sales data, officials from zinc smelters don't believe market demand has recovered.

"I don't think the recent demand surge, which was pushed by the government's stimulus package can last forever," said Li Xialin, vice chairman at Zhongjin Lingnan Nonfemet Co. (000060.SZ), a key zinc smelter in China.

"The market fundamentals haven't changed. Overcapacity and weak demand are still the key issues," said Li, who added that spot zinc prices are already at a relatively "high level" and will soon face a market adjustment.

Copyright and Exemption Declaration :¢ÙAll articles, pictures and videos that are marked with "China Aluminum Network" on this website are copyright and belong to China Aluminium Network (www.alu.com.cn). When transshipment, any media, website or individual must list the source from "China Aluminium Network (www.alu.com.cn)". We seek legal actions against anyone that disobey this. ¢ÚArticles that marked as copy from others are for transferring more information to readers, do not represent or endorse their opinions or accuracy and reliability. When other media, website or individuals copy from our website, must keep the source. Anyone that changes the articles' sources will hold the responsibilities for copyright and law problems. We also seek legal actions against anyone that disobey this. ¢ÛIf any articles copied by our website concern the copyright and other problems, please contact us within one week.