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Despite the Chinese government's decision to introduce a 5 percent export tax on 1# zinc on November 1, 2006 and increase the export tax on refined zin from a current 5 percent to 10 percent, effective June 1, the country will remain a net zinc exporter for the rest of the year, according to Feng Juncong, a zinc expert with Beijing Antaike Information Co. Ltd., a mining and metals information provider affiliated with China Nonferrous Metals Industry Association.

China returned to net zinc importer status in April this year, after maintaining net exporter status for nearly six months since October last year.

"There will be no change in the 5 percent value-added tax (VAT) rebate on 0# refined zinc, which makes up over 65 percent of China's zinc exports. As a result, we will not see a significant reduction in zinc exports this year," Feng said.

China's zinc oversupply will reach nearly 200,000 tons this year, she forecasted.

Based on first quarter production levels, the average monthly production this year will be up 30,000 to 40,000 tons from 2006. Domestic consumption is also set to increase 270,000 to 280,000 tons this year, from 3.39 million tons in 2006, she said

"China produced 3.15 million tons of refined zinc in 2006, at an average rate of 260,000 tons per month. However, zinc smelting capacity reached 4.3 million tons last year. In the past seven years, China's zinc smelting capacity has grown on average 12.8 percent each year. We predict growth to continue to climb until 2010, when China's total zinc smelting capacity will reach 5.8 million tons, up 45.7 percent from 2005," she said.

China's rapid capacity expansion has been mainly driven by rising zinc prices, technological upgrades and government policies that encourage new projects above 100,000 tons in annual capacity, she explained.

China's zinc consumption slackened in August last year, due to pressure from increasing zinc prices. Actual consumption growth decreased from 15 percent in 2005, to 9.8 percent last year.

According to her predictions, China's zinc consumption will remain at 7.6 percent between 2007 and 2010, during which domestic zinc consumption will exceed 4.7 million tons.

She further predicted domestic zinc spot prices would fall to 26,000 yuan (US$3,399.14) per ton in the second half of this year, due to a slowdown in domestic consumption and an eased zinc concentrate supply. The benchmark spot price for 0# refined zinc was 30,100 yuan (US$3,935.15) per ton yesterday on the Shanghai Yangtze River Nonferrous Metals Market.

China's zinc concentrate production amounted to 2.84 million tons in 2006, up 10.9 percent from 2005 while the annual average growth rate was 7.2 percent from 2000 to 2005.

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