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The cuts are expected to reduce the demand of zinc concentrates by about 1 million tonnes (zinc contained) for 2024, Antaike said.
Chinese smelters have been struggling with raw material tightness since the start of 2024, with many operating at huge losses, amid challenges to maintain regular production given higher feedstock costs, sources told Fastmarkets.
The cuts at domestic zinc smelters are in line with market expectations, given the difficulties and higher costs in sourcing for spot zinc concentrates, sources said.
“The cuts [at domestic zinc smelters] are in line with expectations but there is still no sign of relief of tighter zinc concentrates supplies, and this is a completely different scenario that domestic zinc smelters envisioned when they met late last year,” Jinrui Futures’ non-ferrous research team head Zeng Tong said.
Expectations that the commissioning of new mines in 2024 would lead to an increased supply of zinc concentrates have also failed to materialize, according to Zeng.
“Supply tightness of zinc concentrates have dwarfed original production plans at many domestic zinc smelters and domestic zinc output has begun to fall from May. There will be no output growth in the last quarter of this year, with many smelters already starting unplanned production cuts,” Ms Zeng added.
But several market participants continued to adopt a cautious approach, given the uncertainty of the impact of the output cuts due to the lack of details, sources told Fastmarkets.
“The number is still very vague, and I cannot tell how much volume will be cut,” a trader based in Hong Kong said.
“It really depends on how significant the ‘extra’ cuts will be. Some smelters have originally arranged maintenance plans and details on what proportion of the cuts this will account for are not clearly stated in the announcement,” a second Shanghai-based trader said.
Zinc concentrate treatment charges (TCs), which are the fees that traders or miners pay smelters to convert their concentrates into refined metal, have already set a new low since the Fastmarkets started tracking the price in September 2014.
Fastmarkets’ twice-monthly assessment of the zinc spot concentrate TC, cif China fell to $(10)-(40) per tonne on August 9, from $(20)-5 per tonne on July 26.
A total of 14 Chinese zinc smelters, with totalling 4.17 million tonnes or 70% of China’s total, were at the CZSPT quarterly meeting.
Other issues discussed at the meeting include increased usage of slag and establishing a floor price mechanism for zinc concentrate TCs, which will help provide guidance for buying spot zinc concentrates.
The most traded zinc contract on Shanghai Futures Exchange closed at 23,670 yuan ($2,934) per tonne on Thursday, up by 0.55% from Wednesday’s closing price of 23,540 yuan per tonne.
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