Item 1 of 2 Plastic letters arranged to read “Sanctions” are placed in front of Russian flag colors in this illustration taken February 25, 2022. REUTERS/Dado Ruvic/Illustration
Without Ozernoye’s substantial contribution to global mined zinc supply next year, a shortage of zinc concentrate – a raw material to make zinc metal, used to galvanise steel, is likely to persist. Concern over tight supplies is one of the drivers that has pushed zinc prices to a 20-month high.
Asked about the possible delay, Ozernoye told Reuters it plans next year to produce concentrate “in volume comparable to the previously announced targets”.
Ozernoye officially launched production in September, saying that it would reach full capacity of about 320,000 metric tons of zinc in concentrate in 2025.
That represents 2.5% of next year’s global mined zinc supply estimated at 12.86 million tons, industry group the International Lead & Zinc Study Group (ILZSG) said.
The sources, who asked not to be named because they were not authorised to speak publicly, said Ozernoye had yet to produce any material as it could not find an adequate replacement for the components that process rocks into powder-form concentrate.
Ozernoye did not give any production targets when approached by smelters and traders interested in buying their concentrates next year, the sources said.
Glencore can no longer sell the concentrator parts to Ozernoye, which the U.S. government placed under sanctions shortly after the fire.
Glencore declined to comment. The Swiss trader-miner said only it would “fully comply with all sanctions applicable to our business activities”.
Ozernoye is working with local company TEM Partner to try to replicate Glencore’s system, one source said. Production may start in November, the same source said.
The company statement said its equipment was made in Russia by its “in-house design bureau”.
It said it expected to achieve “project capacity within a year from the start of commissioning,” without specifying when that was.
“The part of the flotation equipment, which has already been commissioned, is behaving stably and the first batches of zinc concentrates have been received,” it said.
Reflecting the difficulty of sourcing concentrate, zinc treatment charges (TC), the fees a smelter earns for converting concentrate into refined metal and a gauge of concentrates’ availability, dropped to minus $40 a ton end of September, according to pricing agency SMM.
The lower TC pushed some zinc smelters into losses and they had to cut production.
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Reporting by Julian Luk; editing by Pratima Desai and Barbara Lewis
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