Western Sanctions Disrupt Ozernoye’s Zinc Production Plans
Western sanctions on Russian zinc miner Ozernoye have left the company struggling to replace essential equipment required to increase output, according to multiple sources familiar with the situation. As a result, predictions for global zinc supply in 2025 may be overstated, heightening concerns in a market already facing supply shortages.
Ozernoye officially launched production in September, aiming to reach full capacity of about 320,000 metric tons of zinc concentrate by 2025, which would account for roughly 2.5% of global zinc supply estimated at 12.86 million tons, according to the International Lead & Zinc Study Group (ILZSG). However, sources indicate that the company has yet to produce any zinc concentrate due to difficulties in sourcing replacement components needed for its production equipment.
The components, which transform mined rock into powdered zinc concentrate, were damaged in a fire in November 2023. These components were originally developed and supplied by Glencore Technology, a subsidiary of Glencore, which is also a major zinc and lead producer. However, since the U.S. government placed Ozernoye under sanctions following the fire, Glencore is no longer able to provide the necessary parts.
Ozernoye has since partnered with local company TEM Partner to attempt to replicate Glencore's technology. According to one source, production may resume as early as November, but there remains considerable uncertainty. The company has stated that its replacement equipment was developed in-house by its design bureau, and it expects to achieve “project capacity within a year from the start of commissioning,” though it has not clarified exactly when this will be.
Asked about possible delays, Ozernoye said it plans to produce zinc concentrate next year “in volumes comparable to the previously announced targets.” However, the company has not provided specific production targets when approached by smelters and traders interested in purchasing the concentrate.
The uncertainty surrounding Ozernoye's output adds to the existing pressures in the zinc market, including disruptions at the Century mine and slower-than-expected ramp-up at Ivanhoe Mines' Kipushi project in the Democratic Republic of Congo. Zinc prices recently reached a 20-month high, fueled by fears of a prolonged shortage. The lack of clarity around Ozernoye’s production is seen as another contributing factor to the tight supply outlook.
The difficulty of sourcing zinc concentrate is further reflected in zinc treatment charges (TCs), which represent the fees smelters earn for converting concentrate into refined metal. By the end of September, treatment charges had dropped to minus $40 per ton, according to data from pricing agency SMM, underscoring the limited availability of zinc concentrate on the market.
