China's zinc concentrate deficit in 2016 is estimated at 448,000 mt, widening from 9,000 mt in 2015, key Chinese zinc producer Tongling Nonferrous Metals Group's subsidiary Tongguan Jinyuan said in its commodity report issued Tuesday.
Tongguan Jinyuan said that due to the cold winter back in the first quarter of last year, zinc mines in North China suspended production, thereby limiting domestic mined zinc output in Q1.
It noted that due to environment monitoring in China, domestic zinc mines' output growth last year was less than expected, as against high Chinese smelters' operation rates, resulting in a continual fall in domestic zinc concentrate stocks.
The Tongling subsidiary said that increased stringency of environment protection rules in the first half of 2016 caused suspension of operations at zinc and lead mines in Huayuan county, south-central China's Hunan province -- a key Chinese zinc production base -- which affected around 150,000-200,000 mt/year of mined zinc capacity last year.
Also, some zinc mines that had planned to start commissioning during 2016 have delayed operations, thus limiting China's mined zinc output last year, it said.
China's zinc concentrate demand in 2016 was estimated to have been 5.798 million mt, up 43,000 mt year on year, while its zinc concentrate output last year was 4.4 million mt, up 150,000 mt year on year, the Tongguan Jinyuan figures showed. Tongguan Jinyuan has forecast China's national zinc concentrate output to rise 200,000 mt year on year to 4.6 million mt in 2017.
The higher volume is attributed to new mines' output in the Inner Mongolia Autonomous Region, Gansu province in Northwest China, as well as in southwestern China's Sichuan province.
China's net zinc concentrate imports for 2017 have been forecast to be 900,000 mt, down 50,000 mt year on year.
Several factors motivated Chinese zinc smelters' operations last year, supporting demand for domestic concentrate, the Tongling subsidiary said.
It noted that prices of domestic refined zinc have risen greatly since Q4 2016, prices of silver -- a byproduct of zinc mining -- have surged, and that Chinese smelters who source domestic zinc concentrates could be given 20% of the zinc prices, if they were over Yuan 15,000/mt, all supported demand for concentrate.
Meanwhile, the front-month zinc futures closed at Yuan 20,700/mt ($3,011/mt) on the Shanghai Futures Exchange on December 30, 2016, compared with Yuan 13,320/mt on December 31, 2015.
SHFE's weekly deliverable zinc stocks totaled 152,824 mt on December 30, 2016, compared with 200,428 mt on December 31, 2015.
On-warrant inventories stood at 82,785 mt on December 30, 2016, compared with 79,877 mt on December 31, 2015.
Deliverable stocks are the amount of metal available in the warehouse. On-warrant stocks are the amount of metal which are good for delivery.
