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Antaike Investigation: Impact of Covid-2019 Virus on Overseas Lead and Zinc Mines

2020-03-18 23:40:35

Beijing, 26 Mar. (Antaike)--Covid-2019 has spread globally. Although China has gradually returned to normal production and living orders, foreign nations are still in severe situations and production is challenged. Antaike investigates and assesses that production of lead and zinc mines is mainly affected in South America and transportation is influenced in Southeast Asia and Africa.



Mines begin cutting production


According to Antaike’s statistic, overseas lead and zinc concentrate output was 2.623Mt and 8.95Mt respectively in 2019, of which South America accounted for 27.4% and 33.9%.



Peru government has declared national emergency so as to curb the spread of the covid 19 virus, which will last for 15 days. Many mining companies there put projects on hold or take maintenance, concerning lead and zinc companies like Nexa, Pan American Silver, Newmont and Southern Copper, besides Mexican Veta Grande stops production for 6 months due to environmental protection reasons.



Current output cut in overseas mines is mainly because of the epidemic, and some mines in Europe and south America have already stopped production in accordance with government requirement last week, and South Africa, India and Australia have escalated their prevention and control measures this week. Antaike has calculated that production of many mines in Peru, South Africa and India are affected, and some newly built or expanded projects are suspended.


Table 1 Influence on overseas mines



There are just a few new lead and zinc mines in 2020 and output increment is mainly from Glencore Iscaycruz and Antamina. Antaike estimates about 108kt of zinc concentrate output and 30kt of lead concentrate output will be affected in foreign market in 2020.  


Influence on port and shipping is felt


To control the spread of covid-2019, various nations have launched policies to port transportation, but most ports still work smoothly. However, there might be port congestion and cargo delays. Currently, impact on southeast Asia is severe, and most ships can pass but docking is restricted. Domestic companies express that their orders for import ore are safe currently, but lack of workers to unload is a more prominent problem.



Market is concerning about the continuity of concentrate import and we believe it is inevitable raw materials import will be affected as more and more foreign nations declare emergency.



Besides the main import sources of Russia and Australia, China still has other choices in lead concentrate, therefore its influence may relatively small. However, zinc concentrate importing nations are mainly Australia and Peru, combining to occupy 50%. Import from Peru declined because Antamina slashed output by 100kt in 2019. China’s expected rising import will mainly come from Peru in 2020, if the increment is absent, it will be hard to import from other regions.



Where is the bottom for price?


Prices of lead, zinc and its by-product silver have touched the lowest in recent four years. However, price may still on the way to bottom due to the spread of virus in foreign nations and downward macro economy, and mines at home and abroad faced profit pressure. Although commodities prices like oil all plummeted and mines’ production cost would fall accordingly, but its proportion in cost is low, and the falling cost is much less than the falling zinc price.



Refinery faces high pressure in raw materials supply


Although no mine expresses it will stop production temporally due to cost factor, market is worried about it. According to Antaike’s investigation, domestic ore supply doesn’t show too much increase currently, but some domestic refineries, which have low percentage of import ore before, begin seeking for import sources. Foreign mines also express that market interest on import ore is rising. Refineries have faced loss pressure currently, and they are also considering how to cope with the shortage of raw materials in the near future.




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