- The consignment of sulfuric acid originated from
Young Poong's Seokpo Smelter adds to
the operational risks for Korea Zinc
- Young Poong has passed the
costs and risks associated with sulfuric acid management to Korea
Zinc while backlash from the local community adds to the
burden
- Additional supply will put a strain on Korea Zinc's already
tight capacity; Given the current scale of sulfuric acid
consignment, Young Poong is expected
to be capable of handling it internally
- On April 9, Korea Zinc
announced that it has decided to terminate joint sourcing and
marketing with Young Poong to
improve its earnings performance and reduce costs
SEOUL,
South Korea, April 16,
2024 /PRNewswire/ -- Korea Zinc announced today
that the company has decided not to renew the sulfuric acid
consignment contract with Young
Poong, which is scheduled to expire on June 30, 2024. Korea Zinc's Onsan Refinery
operates 20 sulfuric acid tanks and handled 1.6 million tonnes of
sulfuric acid annually, including over 400,000 tonnes of sulfuric
acid consigned by Young Poong's
Seokpo Smelter in 2023.
Sulfuric acid, for which the consignment contract is set to
terminate, is a byproduct of zinc smelting and a highly toxic,
hazardous chemical substance. That is, handling sulfuric acid
requires rigorous management to prevent safety accidents and is
accompanied by risks and liabilities in accordance with the
Chemicals Control Act. Accordingly, the consignment has added to a
socioeconomic burden that Korea Zinc has been facing with its
in-house generated sulfuric acid, and it is also costly to turn
sulfuric acid into industrial-grade sulfuric compounds.
The decision to discontinue the consignment contract came as
Korea Zinc decommissioned some of its aging sulfuric acid handling
facilities, needed to make additional investments to upgrade the
facilities, and had a capacity shortage due to a steady increase in
the amount of in-house generated sulfuric acid. Notably, Korea Zinc
is expected to generate additional 185,000 tonnes of sulfuric acid
annually, once its subsidiary KEMCO starts its new all-in-one
nickel refinery in 2026.
Moreover, the sulfuric acid consignment by Young Poong's Seokpo Smelter has dwindled to
190,000 tonnes per year due to production disruption and cuts. The
amount is small enough to be transported to East Sea Port near
Seokpo Smelter.
Young Poong has transported
sulfuric acid over 300km of distance to Korea Zinc's Onsan Refinery
using the Onsan Train Line, instead of East Sea Port, which is only
65km away, passing the risks and the burden of managing hazardous
substances on to Korea Zinc.
Notably, as large-scale apartment complexes are being created
along the Onsan Line, there is a growing call from civic groups and
environmental organizations to close down the Onsan Line, and the
backlash from the local community is causing fallout on Korea
Zinc.
That said, in the spirit of the longstanding partnership, Korea
Zinc gave prior notice about its intention to terminate the
consignment contract. Korea Zinc is committed to collaborating with
Young Poong, offering a sufficient
grace period to help Young Poong
transport through East Sea Port and build its own sulfuric acid
handling facilities.
Earlier, Korea Zinc announced that the company ended its joint
sourcing and marketing agreement with Young
Poong, which enabled them to enter joint contracts when
procuring key raw materials such as zinc and selling products. The
expiration of the contract marks an end to these joint operations.
Accordingly, the two companies are going to negotiate and enter
contracts separately with vendors and customers.
Recently, the non-ferrous metals market has come under pressure,
due to difficulties in sourcing raw materials and selling products
amid macroeconomic headwinds. Korea Zinc's latest move is to
improve earnings and save costs at a time when internal and
external uncertainties and unfavorable operating environments make
it increasingly challenging to do business.
"It is the path forward to enhance Korea Zinc's enterprise value
and earnings performance" said Korea Zinc. "Korea Zinc will
continue to do its best to bring greater shareholders' value."
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SOURCE Korea Zinc