This all may have been covered last week while I was away fishing, but does help to explain a bit more about what is happening.
Sichuan earthquake adds to zinc market tightness
Suspended mine operations in neighbouring Gansu province will reduce concentrate stocks
Event: On 8 August 2017, a 7.0-magnitude earthquake struck a remote, mountainous part of China's southwestern province of Sichuan. Strong tremors were felt in Longnan, a city in the neighbouring province of Gansu. As a result, the local safety administration has ordered the suspension of all mining activities in the Longnan region until further notice.
Implications: Gansu is one of the major zinc-mining provinces in China. We estimate it will contribute over 300 kt of zinc in 2017. The Longnan area hosts a cluster of zinc mines, including the Changba, Luoba and Guojiagou mines. We estimate Longnan contributes over 60% of total production from Gansu province.
We expect the same to happen for mines in Longnan, though possibly for a slightly shorter period as the 2008 earthquake was of a greater magnitude. Despite the precautions taken in Gansu, mines in neighbouring Shaanxi province that are located relatively close to the earthquake's epicentre in Sichuan have not been asked to suspend operations yet.
We do not expect the Longnan mine suspensions to have a major impact on the zinc market in the short term as processing plants are allowed to continue operating. However, the market will be further tightened due to the loss of concentrate in the coming months. With a tightly balanced concentrate market predicted for 2017 and low concentrate stocks, smelters will face an even harder task to secure concentrate feed.
RVR Price at posting:
22.5¢ Sentiment: Buy Disclosure: Held
