(Bloomberg) -- China’s major zinc smelters are discussing possible output cuts, after tight global supplies of concentrate and weak demand forced spot processing fees into negative territory.
The response to the unprecedented decline in fees, which determine smelter profits, is being discussed at an industry gathering in the Inner Mongolia region that began Wednesday, according to people with knowledge of the issue, who declined to be identified because the matter is private.
The two-day meeting is organized by state-owned researcher Beijing Antaike Information Development Co. and attended by representatives from major domestic zinc miners, smelters and traders, according to an announcement posted on Antaike’s official Wechat account.
China’s smelters, which supply over half the world’s refined zinc — a metal used to galvanize steel — have too much capacity compared to their raw material supply. A similar dynamic is playing out in the nation’s copper market.
Demand in China is also weak due to a crisis among customers in the steel industry. Spot treatment charges on imported zinc concentrate have fallen below zero over the past month. The annual benchmark was set at its lowest since 2021 earlier this year, as competition has increased among smelters to process mined ores.
Chinese zinc output has already eased from the record high hit in December, with July production falling to a one-year low of 536,000 tons. Output may drop further this month due to tightness in the supply of ore, Shanghai Metals Market said in a note.
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