Price drives rise in China's zinc metal imports

Higher domestic zinc prices are prompting Chinese merchants to import more metal. But record lows fees received by Chinese smelters for processing imported concentrate into zinc are cutting the smelters' imports of their main raw material.
Strong demand for zinc, used to protect steel contained in products ranging from car bodies to power pylons, has pushed up prices in China by 18 percent since July 1, raising imports and supporting world zinc prices.
"This is the first time I see zinc from Africa and North Korea being sold here," a merchant in Shanghai said, referring to increased supply of imported zinc.
Industry officials have estimated China's zinc-galvanised steel capacity will rise by two million tonnes from 2004 to 12 million tonnes by the end of this year.
Spot zinc is trading at about 15,250 yuan ($1,889) a tonne in China.
Prices are higher than the cost of imported metal, although world zinc prices have risen 15 percent since July 1 to $1,412 a tonne, basis three months delivery on the benchmark London Metal Exchange.
Supply of locally produced zinc has fallen because dozens of small smelters in Guizhou were closed by the provincial environment authority in August, with a total annual capacity of about 200,000 tonnes involved.
Official data showed China's net imports of refined zinc and zinc alloy reached 182,282 tonnes in the first seven months, already 93 percent of net imports for the whole of 2004.
High domestic metal prices have boosted Chinese prices of zinc concentrate by more than 30 percent since May to about 9,400 yuan a tonne.
Prices for imported concentrate are also up on global supply tightness, discouraging Chinese smelters from importing.
Spot zinc concentrates were being offered to China at record lows fees, or treatment charges, of $10 to $20 a tonne, against about $50 in May and $110 in January.
The fees are paid by the sellers to Chinese smelters, and are then deducted from the sale price, based on the LME price.
"I have been selling concentrates for years, I have not seen the fees that low before," a dealer for an international trading house said.
China, which imports about a third of its concentrate, mined 943,328 tonnes of zinc in January-July 2005, up 7.8 percent from a year ago.
It imported 324,122 tonnes of zinc concentrate in the first seven months, down 20 percent.
China produced 1.71 million tonnes of refined zinc in January-August 2005, a 4.2 percent rise from a year ago. The output rise was 11.9 percent in the same period last year.