"The majority of CHNR�s revenue is derived from the sale of zinc and iron. As a result, our earnings are directly related to the prices of these metals. I. Zinc Production World zinc consumption in 2005 was 10.724 million tons and production was only 10.282 million tons. It is forecasted that World zinc consumption is forecast to rise by around 4 per cent in 2006 to 11.133 million tons and the production to 10.693 million. In 2007, global zinc consumption is forecast to rise by over 2 per cent, driven by world economic growth and increased consumption in China and the United States.
China�s zinc consumption rose by 13 per cent in 2005 to 3.05 million tons, and is the world�s largest consumer of zinc, accounting for 28 per cent of global consumption. Zinc prices in London have surged 75 percent this year and reached a record $4,000 a ton in May on expectations China's expanding economy will require more zinc. The domestic supply of mined zinc is likely to lag behind demand by more than 10 percent this year, pushing up concentrate prices.
In the next two years, most of Chinese zinc smelters are still expected to operate at less than full capacity due to the shortage of zinc concentrates. Because of the market conditions, as a zinc concentrate supplier, CHNR has stronger bargain power in price negotiations. Insufficient concentrate supply continued to plague smelters in 2005 and to benefit our sales and net income.
II. Iron Production
In year 2006, the growth of China's iron ore imports registered significant gains in the first half of the year but the rate of growth has decelerated due to an increase in investment in domestic mines, international price hikes and the supply of ore in the country. Significant hikes in international iron ore prices have forced China to increase its investment in domestic iron mines. Between January and July this year, China's investment in iron mines jumped 71.4 percent to 20.061 billion yuan (2.5 billion U.S. dollars).
Iron took off from RMB300 (USD37.5) per ton in 2003, and hit as high as RMB 1,100 (USD137.5). The price now becomes stable and remains in the range between RMB 560 (USD 70) and 680 (USD85). China's iron ore production in 2005 reached 420.49 million tons, up 93.77 percent from 2001. The increase in the domestic supply has pushed the price of China-produced ore lower than that of imported ores. It is expected that China�s iron ore output is likely to exceed 500 million tons this year.
The iron products from CHNR have a great market due to the better quality of the products and our established reputation. "