South Korea's Seokpo zinc smelter cuts output by a fifth

YoungPoong

06/03/2024 10:13

By Julian Luk and Joyce Lee
       LONDON/SEOUL, March 6 (Reuters) - South Korea's Young
Poong Corp  000670.KS  has cut production at its Seokpo zinc
smelter by a fifth, the company said, adding that market
speculation that the facility may close was incorrect. 
    The zinc market is closely watching the fate of the 400,000
metric ton-per-year smelter, the world's sixth-largest. Big
production cuts or a complete shutdown could narrow an expected
300,000 ton surplus this year or tip the market into deficit.
    "The Seokpo facility is currently producing about 80% of its
capacity, but the work stoppage issue will be solved soon," a
company spokesperson said. 
    "The rumour that the Seokpo facility is going to close
altogether is nothing but baseless accusations and hearsay."
    Raw material suppliers sources said the Seokpo smelter will
be running at 50% capacity from March and that there was a
chance it could be closed.
    Some operations had halted since December, the spokesperson
said, after an incident in which one person died after being
exposed to what appears to be arsine gas at the facility. 
    In 2021, South Korean authorities ordered the shut down of
the smelter in North Gyeongsang province for two months for
violation of the Water Environment Conservation Act, the company
said in a filing. 
    Young Poong has appealed the order, and whether the shutdown
will take place is not known as legal proceedings are still
ongoing, the spokesperson said. 
    Zinc prices  CMZN3  at around $2,460 a metric ton have lost
20% from a year ago, resulting in suspension of multiple zinc
mines and smelters over the past year.
    "The current LME price and treatment charge (T/C) are very
disadvantageous to smelters, so flexible responses can be
considered accordingly," the spokesperson said.
    Treatment charges are earned by smelters for turning zinc
concentrates to refined metal, used to galvanise steel. 
    Weak demand due to the slowdown in global construction
activity has meant higher inventories at warehouses approved by
the London Metal Exchange (LME), a market of last resort. 
    LME zinc stocks are at their highest in more than three
years.  MZNSTX-TOTAL  
    Korea Zinc  10130.KS , the world's biggest producer of both
zinc and lead metal, has bought zinc concentrates for a group of
smelters including Seokpo every year. 
    Young Poong owned a 24.8% stake in Korea Zinc as of
end-September, and is its biggest shareholder. 

 (Reporting by Julian Luk and Joyce Lee; editing by Pratima
Desai and Ros Russell)
 ((julian.luk@thomsonreuters.com; Reuters Messaging:
julian.luk.thomsonreuters.com@reuters.net))