August 28, 2019: A second outage within days of a re-start at Nyrstar’s primary lead-zinc refinery at Port Pirie in south Australia is an indicator of fundamental process issues rather than just simple repairs, says Wood Mackenzie lead analyst Farid Ahmed.
Lead prices hit a two-week high of $2,101.50/tonne immediately after the shut down, which happened at the beginning of August and came days after the first series of failures, which had halted production for at least six weeks.
“It was telling that Nyrstar declared force majeure almost immediately in both instances, suggesting it was either — or both — that they had very low stocks of finished refined lead to see them through the downtime, or they recognized at a very early stage that the shutdown could quickly become protracted,” Ahmed told BESB.
“The latter soon proved to be the case with the first downtime period being extended from one to two months. This was reinforced by the announcement shortly after the second failure that the shutdown could last 12 weeks.”
Ahmed said it all indicated fundamental process issues “rather than just a dig-out and repairs to a furnace. This extended period suggests that some re-engineering of the process is needed – and that takes time.”
Ahmed said the second outage would likely have a much greater impact on markets.
“The lost production from the initially-indicated one-month shutdown after the first failure in June ruffled the lead markets, but the loss of around 15kt of refined lead could be accommodated without too much upset.” He said.
“Markets were troubled when this extended to encompass the whole of June and July, with the price reacting accordingly.
“But news of a potential three-month shutdown following the second furnace failure makes a more serious impact and could reduce Port Pirie’s output by a whopping 75kt for this year.
“Not only is this going to hurt Nyrstar financially, it means miners and traders having to redirect lead concentrate supplies — the key raw material for Port Pirie — to other smelters chiefly around south east Asia and China.
“And this comes at a time with growing pessimism for lead demand in the short term, but which will ease supply in what remains a quite tight market for lead concentrate.
“A lot of people are watching for the next announcement from Nyrstar on the progress of the repair work at Port Pirie.”
Nyrstar said there was no further update on the issue.