S. Korea zinc demand falls but supply seen tight

/REUTERS, Seoul, October 21, 2004/ - South Korea will consume 7.6 percent less zinc in 2004, but a decline in imports from China means supplies of the metal will be tight, industry officials said on Thursday. South Korea's refined zinc demand this year is projected at 400,000 tonnes, nine percent below earlier forecasts, data from the country's top producer, Korea Zinc Co. Ltd. showed. "Business is very poor," a zinc trader in Seoul said, referring to demand from the construction and automotive sectors, both major consumers of galvanised steel. "But frankly, we don't feel bearish demand because it's hard to get zinc in the spot market," another trader said. Zinc is used mainly as an anti-corrosive coating in galvanised steel production. At around $1,050 a tonne, the metal's three-month price on the London Metal Exchange is 11 percent higher than a year ago. Many South Korean traders said they had sourced zinc ingots from unusual places this year, recently importing some from Kazakhstan. But he added imports from Kazakhstan were unlikely to continue because of high transport costs. Traders said premiums on Chinese zinc had risen to around $100 per tonne, delivered to South Korean ports, from $40 per tonne early this year, due to the supply shortage. South Korea imported 50,379 tonnes of refined zinc in the first nine months of this year, a decline of 38 percent from a year earlier, industry data showed. Of this total, 91 percent came from China and seven percent from Australia. Asked if the current tightness in the zinc market would continue next year, a third trader said: "It all depends on China." NORTH KOREAN IMPORTS Industry figures exclude imports from North Korea, which is not classified by Seoul as a separate country for this data. South Korea imported 28,540 tonnes of refined zinc from North Korea between January and September this year, a similar amount to last year, but traders said North Korean zinc was becoming less available. Korea Zinc and Young Poong Corp, the country's only two zinc refineries, were expected to produce a combined 671,000 tonnes this year, traders said. At least half of this is exported. This was up from slightly less than 640,000 tonnes last year, but around 10,000 tonnes less than the combined targets set by the companies early this year, they said. Korea Zinc in February targeted 2004 output of 430,000 tonnes against 427,518 tonnes last year, while Young Poong had planned to produce 251,000 tonnes against 217,000 tonnes, the traders said. The two refineries have expanded their domestic market share. Traders said domestic users that previously consumed cheaper, low-quality, Chinese zinc were unable to source enough material from their suppliers. However, most local sales were tied up in long-term contracts signed late last year, meaning there was not much zinc available for spot sales, the traders said. South Korea's refined zinc exports also rose 7.3 percent to 281,820 tonnes between January and September this year from the same year-earlier period, industry data showed. [2004-10-21]