Poongsan, Korea Zinc to benefit from rising raw material prices

Slashed plant operations at European smelters due to the Russian LNG import ban are also positive for Korean smelters

Korean smelters are set to benefit from rising raw material prices

Jung-hwan Hwang 1

Mar 14, 2022 (Gmt+09:00) jung@hankyung.com

Steel

South Korea’s non-ferrous metal smelters such as Korea Zinc Co. and Poongsan Corp. are set to benefit from rising prices of raw materials in the wake of the Russia-Ukraine crisis.

According to Korea’s trade ministry on Monday, the global zinc prices stood at $3,835 a ton on average as of March 11, up 6.5% from the start of the year and a 38% increase from a year earlier.

Electrolytic copper traded at $10,145 a ton on March 11, up 5% from the start of the year and an 11% rise over a year.

Non-ferrous metal prices have also been rising as Glencore, a Swiss commodity and mining company, and other European smelters were reducing their plant operations due to a power shortage.

Manufacturing companies across Europe are slowing their plant operations following the EU’s recent decision to stop imports of Russian LNG to hold Russia accountable for its aggression on Ukraine.

Reduced supply from non-ferrous metal smelters is, in turn, boosting metal prices, according to industry watchers.

Piles of copper pipes at a Poongsan plant in Ulsan, South Korea

SUPPLY-DEMAND IMBALANCE

The supply-demand imbalance is working positively for Korean smelters, which are leading players globally.

Korea Zinc is the world’s largest lead and zinc smelter, while LS-Nikko Copper Co. is the world’s No. 2 electrolytic copper manufacturer.

For most smelters, the main source of profit comes from the treatment charges (TCs), fees they receive from miners for processing zinc concentrate and other metals into refined products.

Smelters also make money from extracting by-products such as gold, silver and sulfuric acid.

According to global metal price tracker Fastmarkets, the spot zinc TC was $150-$200 a ton on March 11, up from $135-$170 on Feb. 25.

Investors’ enhanced appetite for safe assets such as gold following international sanctions against Russia has also raised the prices of precious metals, including platinum and palladium, by as much as 30% over the same period.

Shares of Korea Zinc have risen 13% over the past month to 586,000 won on Monday, while Poongsan has gained 5.3% to 33,850 won.

Write to Jung-hwan Hwang at jung@hankyung.com
In-Soo Nam edited this article.