Russia launches major zinc concentrate plant after delays linked to fire, US sanctions

Ozernoye, situated in a remote area about 200 km (124 miles) from the border with Mongolia, aims to process up to 6 million tons of zinc ore with output volumes of up to 600,000 tons of concentrate with 53% zinc content when it reaches full capacity in 2025.

The plant will be the fifth in the world in terms of concentrate production volume with a 4.5% share of global concentrate output.

Sanctions imposed in 2023 on Ozernoye’s owner, metals magnate Vladislav Sviblov, and his companies by Washington and London complicated the search to replace Western equipment that was destroyed in the fire.

The company said on Wednesday that it had relied on domestic technology to replace the equipment.

“The launch of the Ozernoye plant contributes to ensuring the economic sovereignty of the state,” deputy prime minister Yuri Trutnev said at the opening ceremony.

The launch of Ozernoye is expected to help ease tight global supply of zinc concentrate that is being felt in top consumer China this year, with global mine production heading for a third consecutive year of decline.

Despite tight supply of the raw material, the global refined zinc market is currently in surplus. Zinc is used to galvanize steel with the construction sector being the main market.

Analysts at Macquarie expect the global surplus of refined zinc to grow in 2025 as both mine supply and smelter production increase.

Ozernoye said that demand for its concentrate from buyers in the Asia region was sufficient.

“Countries in the Asia-Pacific region are strategic markets for our products. The capacity of these markets is sufficient for product sales. There is interest in the concentrate from major buyers,” a company representative said.

He did not specify which other markets, apart from China, it was targeting. Russia’s trade with China has been hampered by payment delays as Chinese banks tightened their compliance for fear of secondary Western sanctions.

Russian domestic demand for zinc has also been growing, as the metal is widely used in the military industry, which is ramping up production to meet the army’s needs for what Russia calls its “special military operation” in Ukraine.

Chelyabinsk Zinc Plant in the Urals, the only producer of the metal in Russia, has been quickly increasing its output after a decline in recent years following reconstruction work, which added 15% to its capacity.

Another smelter, the New Verkhny Ufaley, is expected to start production in 2025 with a projected annual output of 120,000 tons. By 2027, Russia will be able to produce 322,000 tons of refined zinc annually, up from last year’s 205,000, consultancy CRU said.