Western sanctions on Russia’s zinc miner Ozernoye are hindering its ability to replace essential equipment needed to increase output, according to three sources familiar with the situation. This could result in overestimations of mined zinc supply forecasts for 2025.
Ozernoye’s contribution is crucial to the global zinc supply next year, and its absence may lead to a persistent shortage of zinc concentrate—a key raw material used in galvanizing steel. Concerns about tight supplies have already driven zinc prices to a 20-month high. Despite this, Ozernoye told Reuters it plans to produce concentrate in volumes comparable to previously announced targets next year.
The company officially launched production in September, with aims to reach full capacity of about 320,000 metric tons of zinc concentrate by 2025, which would account for 2.5% of the estimated global mined zinc supply of 12.86 million tons, according to the International Lead & Zinc Study Group (ILZSG). The ILZSG included Ozernoye’s ramp-up in its forecasts, predicting an 8.9% increase in new zinc supply outside China for 2025.
However, sources indicated that Ozernoye has not yet produced any material due to difficulties finding suitable replacements for equipment damaged in a fire in November 2023. The company has not provided production targets to potential buyers, including smelters and traders.
The necessary components for processing were developed by Glencore’s subsidiary, Glencore Technology, which can no longer supply them due to U.S. sanctions imposed after the fire. While Glencore has declined to comment on the situation, it has stated its commitment to comply with all applicable sanctions.
Ozernoye is collaborating with local firm TEM Partner to replicate Glencore’s system, with potential production beginning in November. The company indicated that some flotation equipment has been commissioned and is functioning stably, with initial batches of zinc concentrates already produced.
The uncertainty surrounding Ozernoye’s output is compounded by other disruptions, including a force majeure declared by Century and slower-than-expected ramp-up at Ivanhoe’s Kipushi project in the Democratic Republic of Congo.
Reflecting the challenges in sourcing concentrate, zinc treatment charges (TC)—the fees smelters earn for converting concentrate into refined metal—dropped to minus $40 a ton by the end of September, according to pricing agency SMM. This decline has pushed some zinc smelters into losses, forcing them to reduce production.
