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Zinc is used for galvanizing steel to prevent it from rusting as well as to make copper based alloys like brass. This special galvanized steel finds end use in outdoor construction and transportation related activities[1]. A further major use is in zinc alloys for die casting parts[2]. Zinc is not a particularly abundant element and makes up only 0.007% of the Earth's crust and is usually found as Zinc Sulfide. Since 1981, Zinc has served as the primary metal in the production of the U.S. Penny, with Copper being applied as a coating to retain the original color and appearance of the coin.

The chart at left shows continuous front-month futures prices for Zinc traded on the London Metal Exchange.

Key Trends and Forces

The economic inviability and consequent shutdown of existing mines due to low price reducing the stock of zinc in the market

The increased supply of zinc from mine expansions in China, Australia, Bolivia, Kazakhstan, India and Canada has led to a global surplus inventory of about 150,000 tonnes in 2008.[3] The spot price of zinc has decreased by more than 48% within the year.[4] The lower prices have reduced the already narrow margin of some of the more cost ineffective mines around world. Intec, Aim Resources and Hudson Bay Minerals have suspended operations and stopped development works at their mines.[4] Perilya and CBH Resources also have announced to cut down the production by over 20% in their mines.[4] The continuation of the trend would ensure the survival of only the relatively cost effective producers. Taking advantage of it's lower cost of production, HZL has announced plans to increase its production to over 1 million tonnes/annum.[5] This step would increase the market share of HZL in the zinc commodities market. An overview on the recent production cuts is shown in the latest Abare Australian Commodities Review, Page 736[6].

Zinc Producers

Some of its Important integrated, miners, and smelters are mentioned below.

Integrated Players

  • Xstrata - It is headquartered in Zug, Switzerland and is a diversified mining company. The company produces copper, coking coal, thermal coal, ferrochrome, nickel, vanadium, and zinc.[7] It has production sites in Germany, the United Kingdom, Spain, and mines in Australia.[8]
  • Teck Cominco - Headquartered in Vancouver, Canada, the Group's principal activities are Smelting and Refining which includes zinc and lead, electrical power, fertilizers and specialty metals. The company operates the Red Dog Mine in Alaska which is the world biggest zinc mine[9]. It also produces gold, copper, molybdenum, niobium, silver and metallurgical coal. In 2007, it acquired 93% of Aur Resources Inc.[10]
  • Glencore - Glencore is headquartered in Baar, Switzerland. It operates in Metals and Minerals, Energy Products, and Agricultural Products. Apart from Zinc, the company produces aluminium, alumina, lead, copper, nickel and cobalt.[11]
  • New Boliden - New Boliden is a mining and smelting company headquartered in Stockholm, Sweden. It has operations in exploration, mining , smelting, refining, and recycling. Apart from zinc the company produces copper, lead, gold, and silver. In all the company has eight mines.[12]

Miners

  • Chinese Minmetals - The company was aquiring all of OZ Mineral's mining assets with the exception of the new Prominent Hill Copper and Gold mine in June 2009. Its operations include the mining and exploration of zinc, copper, silver, gold, lead, nickel, and other metals. The company operates the zinc mines Century in Queensland, Roseberry in Tasmania and Golden Groove in Western Australia and further copper/gold mines.[13]
  • Anglo American - Anglo American,is headquartered in London, UK. The company and its subsidiaries are leading producer of Gold (AngloGold Ashanti), Platinum (Anglo Platinum), Diamond(De Beers), Iron Ore, coal (Anglo Coal), chromium,zinc, lead, steel and packaging and paper.[14]

Smelters

  • Nyrstar - Nyrstar is headquartered in Belgium. It is the worlds biggest smelter. It was formed in 2007 as a joint venture between Umicore and Zinifex. Subsequently, Nyrstar was sold with a share placement at the Euronext in Brussels. It processes more than one million tonnes of zinc per year of which more than half is sold to Europe.[15]
  • Korea Zinc - Headquartered in Korea, Korea Zinc primarily produces zinc and lead. It also produces gold, silver, platinum, and copper. Korea Zinc acquired Big River Zinc in 1996 and began operations in the US. But the company closed up shop at Big River Zinc in February 2006 due to rising costs in zinc ore.[16]

Financial Comparison:

Financial metrics FY2007
Name Revenue in Million $ Net Profit in Million $ Operating Margin
Xstrata[17]28,5425,54338.14%
Teck Cominco[18]6,3711,61543%
New Boliden[19]4,27748816.34%
Zinifex[20]1,51690759%
Anglo American[21]25,4708,17232.47%
Nyrstar[22]3,33039714%
Korea Zinc[23]3,64146416.66%


Market Share

Although HZL is the second largest integrated zinc producer, it ranks fifth in terms of mining companies and seventh in terms of smelting companies.

Market Share of Zinc Mining and Smelting Companies
Market Share of Zinc Mining and Smelting Companies [24]

References

  1. Uses of Galvanized steel
  2. International Lead and Zinc Study Group
  3. 19th Nov 2008, The Economic Times
  4. 4.0 4.1 4.2
  5. Abare Australian Commodities Review, December 2008
  6. Linked In, Company profile:Xstrata
  7. Yahoo Finance, Company profile:Xstrata
  8. Red Dog Operations Webpage
  9. Wright Reports, Teck Cominco Limited - Company Profile Snapshot
  10. Linked in, company profile Glencore
  11. Linked in, Company profile Boliden
  12. Minmetals Succeeds in OZ Minerals Deal
  13. Yahoo Finance, Company Profile: Anglo American
  14. Yahoo Finance, Company profile: Nyrstar
  15. Yahoo Finance, Company Profile: Korea Zinc
  16. Xstrata Annual report
  17. Yahoo Finance, Teck Cominco Financial Results
  18. New Boliden Financial statements
  19. CBRonline, Zinifex
  20. Anglo American Annual report
  21. Nyrstar Annual report
  22. Alacra store, Korea Zinc company report
  23. NYRSTAR, 2008 International Zinc Conference
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