EDITOR: | October 18th, 2016

Russian zinc market on verge of monopolization

| October 18, 2016 | No Comments
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Zinc from Periodic Table of the Elements with magnifying glass

Zinc from Periodic Table of the Elements with magnifying glass

The Russian zinc market is on the verge of monopolization, as the Ural Mining and Metallurgical Company (UMMC), a Russian metallurgical company, and the second largest copper producer in the country, has completed the acquisition of the Chelyabinsk Zinc Plant (CZP), one of Russia’s largest zinc producers, which holds 60% of the local market.

The deal has been approved by the Russian Federal Anti-Monopoly Service (FAS) after a long consideration and despite the fact that the acquisition of CZP will allow UMMC to control 90% of the Russian zinc market, as the company already operates Electrozink, another Russia’s leading zinc producer, which holds about 30% of the local market.

Under the terms of the deal, UMMC acquires the 92.73% stake in the CZP , which will allow it to fully consolidate the asset.

The amount of the deal is not disclosed, however, according to some sources close to the Russian Ministry of Energy, it may be in the range of RUB 10-11 billion (US$150 million).

Currently CZP operates raw materials base and production assets in Russia and Kazakhstan, while its revenue for 2015 amounted to 24 billion rubles (US$250 million). The annual volume of production is estimated at 171,000 tonnes of zinc and zinc alloys. The majority of production is supplied to Russia’s largest steel manufacturers, among which are Severstal and Novolipetsk Steel.

Despite the fact that Russia currently remains the world’s leading country, in terms of overal zinc reserves (about 15% of world reserves), it is not even in the top ten of global producers, holding only 3% of the global production.

This is mainly due to low content of zinc ores in the country, which is varied in the range of 3.8-4.3%, which is signifcantly lower than in other global zinc producers (for instance, the zinc content in the Australian ore is 15%).

In the case of UMMC, the company mainly produces zinc as a by-product of copper-pyrite ores. The largest fields, operated by the company, are Gayskoe and Uchalinsky. Zinc content of the latter is estimated at 3.46%.

In the case of the Chelyabinsk Zinc Plant, to date, the plant has used the Kazakh Akzhal field as a raw materials’ base in its production with the zinc content of 3.28%.

Currently a significant part of Russian zinc is exported to abroad. According to data of the Russian Federal Customs Service, in 2015 total exports of Russian zinc amounted to US$115 million in value terms.

Among the largest sale markets for Russian zinc are the UK, Turkey, as well as the EU states. Currently total volume of zinc production is estimated at 230,000 tonnes and there is a possibility that these figures will significantly increase in the coming years, that will be mainly due to ongoing consolidation of the industry.

According to predictions, the demand for zinc in Russia will continue to grow in the coming years, while the biggest growth will be observed in the case of the domestic defence industry, which in recent years has become one of the largest zinc consumers in the country.


Eugene Gerden

Editor:

Eugene Gerden is an international free-lance writer, based in St. Petersburg, who specializes on writing in the field of mining, metals and rare earth metals. ... <Read more about Eugene Gerden>


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