China’s major zinc smelters are contemplating potential output reductions following a significant drop in processing fees and weak global demand. This unprecedented decline in fees, which directly affect smelter profitability, is being addressed at a two-day industry meeting in Inner Mongolia, starting Wednesday.
The meeting, organized by state-owned Beijing Antaike Information Development Co., brings together key players from China’s zinc sector, including miners, smelters, and traders. The gathering aims to discuss the impact of the current market conditions on the industry.
China, which produces over half of the world’s refined zinc, faces an oversupply of smelting capacity relative to its concentrate supply. This issue mirrors similar challenges in the copper market. Weak demand from the steel industry, which is experiencing its own set of difficulties, has further exacerbated the situation. Over the past month, spot treatment charges for imported zinc concentrate have fallen below zero, reflecting a competitive smelting environment.
The annual benchmark for processing fees, set earlier this year, hit its lowest level since 2021 due to increased competition among smelters. As a result, Chinese zinc production has already decreased from a record high achieved in December. In July, production fell to a one-year low of 536,000 tons. Further reductions in output are expected this month due to ongoing ore supply constraints, according to a note from Shanghai Metals Market.
