THE plan by China’s top zinc smelters to cut output may not be enough to bring sustained long-term relief to the beleaguered sector as galvanizing demand from the steel industry weakens, industry sources said.

Major smelters in the world’s top zinc producer proposed reducing output by 10 percent last week to shore up prices, which are on track for their worst quarterly performance since the third quarter of 2015.

The decision highlights the growing financial pain in the sector, but the move only gave a short-lived boost to prices for the metal used to galvanize steel, which protects it from rusting. Market participants are not convinced Chinese producers will carry out the cuts.

Ballooning stockpiles of refined metal and a poor order books from galvanizer explains the lukewarm market reaction.

An executive at a major Chinese smelter reckons the impact of the cuts will be minimal. “Galvanized pipe firms ... are currently subject to strict environmental protection policies,” he said, declining to be named. “Production suspensions and reductions are severe.”

The coordinated move comes after Chinese zinc production dropped by 5 percent in May from a month earlier, although it was up 1.6 percent year on year in the first five months of 2018, data from the National Bureau of Statistics shows.

Cutting 10 percent of output would equate to about 400,000 tons on an annualized basis, said Helen Lau, an analyst at Argonaut Securities. (SD-Agencies)