Russian Firms Increase Zinc Production to Meet Government Demand, Sources Report

By Polina Devitt and Pratima Desai

LONDON (Reuters) – In response to increasing state demand and a desire to lessen dependence on China for zinc exports, Russian companies have ramped up zinc metal production over the past month, according to two sources familiar with the situation.

While Russia’s output of zinc, utilized for galvanizing steel, comprises only a small portion of the global total, it is expected to contribute to the tightening of the global zinc concentrate market, as evidenced by recent trends in China’s imports.

Following the imposition of Western sanctions on Russia after its invasion of Ukraine in February 2022, exports of Russian commodities to China surged. However, expanding U.S. sanctions, which include restrictions on the only Russian bank branch in China, have limited the options for facilitating payments to Russian companies, a crucial aspect for maintaining state revenues.

Sources indicate that the Russian companies UMMC and RCC have increased the production of refined zinc in light of decreased zinc concentrate exports to China. This decline is attributed to issues with timely payments and the discounts that Chinese buyers request for on-time transactions. Russian state orders for finished products have risen, leading to fewer payment transactions related to the reduced shipments of refined zinc to China.

UMMC and RCC, both involved in zinc mining in Russia, did not provide comments when approached for information. Production of finished metal products in Russia, which includes items like weapons and ammunition, surged by 56% in May.

The Chelyabinsk Zinc Plant, currently the only producer of this metal in Russia, is rapidly increasing its output after a previous decline associated with reconstruction efforts. The upgrades at the plant, which is owned by UMMC, have enhanced its production capacity by approximately 15%.

Consultancy CRU projects that output from the plant will rise to 212,000 metric tons by 2025, an increase from 209,000 tons this year, which would represent 1.5% of the estimated global total of 14.0 million tons for 2024.

Additionally, a smelter called the New Verkhny Ufaley, owned by local firm Polimet Engineering, is anticipated to commence production in the third quarter, with expected output of 40,000 tons this year and an increase to 80,000 tons by 2025.

By 2027, total refined zinc production in Russia, from both the Chelyabinsk and Verkhny Ufaley smelters, is projected to reach 322,000 tons, up from last year’s figures of 205,000 tons, according to CRU analyst Tom Rutland.