In recent years, the global lead-zinc smelting capacity keeps being transferred to China, and the lead-zinc production capacity of China has presented high-speed growth since 2004. In 2010, the lead and zinc production and sales volume of China both accounts for 41% of global total, ranking first around the globe. At present, refined lead has been in overcapacity in domestic Chinese market, while refined zinc is much sought after.
Chinese lead and zinc industry characterizes the followings:
Firstly, the lead and zinc industry features a low concentration degree. There are numerous lead-zinc manufacturers but with limited production in China. In H1 2011, the outputs of lead and zinc of the top five companies by lead-zinc output merely occupy 17.3% and 26.8% of national total output, respectively.
Secondly, Chinese lead-zinc smelting companies have a heavy reliance on the overseas concentrate products. Since 2004, China has been the importer of lead and zinc concentrates from abroad. From January to September of 2011, China totally imported 951,000 tons of lead concentrates, sharing 28.2% of refined lead output in the same period; and it imported 2.204 million tons of zinc concentrates, accounting for 57.6% of zinc output in the same period.
Last, secondary lead is the focus of investments in the lead and zinc industry. During January to September of 2011, China's output of refined lead reached 3.374 million tons, rising 14.11% year-on-year; wherein, the output of mineral lead registered 2.36 million tons, taking 70% of total refined lead output, and that of secondary lead occupied 30% of the total. The world's secondary lead accounts for 52.47% on average. Compared with mineral lead, the secondary lead is characterized by little consumption of resources, little pollution and high gross margin. Due to the shortage of lead resources, the Government endeavors to develop circular economy and construct resource-saving society, and Chinese production capacity of secondary lead will rise substantially.
The report not only analyzes the supply and demand, export and import and competition pattern of the global and China lead and zinc industry, but studies the eight key players in Chinese lead and zinc industry, covering production, operation, project planning, prospects and forecasts.
Currently, Chinese lead and zinc companies raise the gross margin of products and enhance profitability mainly through two means:
Firstly, the high cost of raw materials severely cut the profit of smelting enterprises since most lead-zinc ore resources are under control of international mining giants. Thus, some Chinese lead and zinc companies should increase resource reserves through mergers and acquisitions, equity purchase and so forth and extend towards the upstream of lead-zinc industry chains.
Taking Shenzhen Zhongjin Lingnan Nonfemet Co., Ltd for example, in 2008, it expanded its lead-zinc resource reserves, reduced the cost of smelting raw materials and significantly promoted the gross margin of products by means of equity merger on Australian PEM Mine. Also, the company sold part of lead-zinc concentrates and yielded considerable benefits. In the first three quarters of 2011, the net income of the company soared 78.57% YoY to RMB715 million.
Secondly, some companies also carry the deep-processing of lead-zinc mine tailings and produces by-products such as rare precious metals, marching into the downstream of the industrial chains.
For instance, Yunnan Chihong Zinc Germanium Co., Ltd effectively raises its profit margin by the deep-processing of mine tailings to produce precious metals like silver, molybdenum, germanium, etc. In the first three quarters of 2011, its operating revenue amounted to RMB4.044 billion, up 14% year-on-year; and net income got to RMB251 million.
Additionally, part of lead and zinc firms without or short of lead and zinc reserves are confined to the smelting segment of the industrial chain. At present, those pure smelting firms are mostly in meager profit or the loss with the comparatively high costs of raw materials and processing, with the Zhuzhou Smelter Group Co., Ltd and Huludao Zinc Industry Co., Ltd as the most typical cases.