Efficiency Analysis of East Asian Zinc Smelters and the Effects of Capacity and Bonus Zinc on Efficiency

Abstract

Non-ferrous metals are widely used as basic materials in various industrial fields, and zinc is a metal that is produced and used next to iron, aluminum, and copper. In this study, DEA (data envelopment analysis) was applied to measure the efficiency of 43 zinc smelters in three countries in East Asia: Korea, China, and Japan. The constant returns to scale (CRS) and the variable returns to scale (VRS) models, and the slack-based measure (SBM) were used for the analysis. As a result of the efficiency analysis, there were three efficient zinc smelters in the CRS model, 14 in the VRS model and 14 in the SBM. The average efficiency was 0.458 based on the SBM, which indicates that there is room for improvement in efficiency. In addition, the average scale efficiency value was 0.689, showing the scale to be inefficient. Therefore, it can be seen that the labor cost and the energy cost must be brought to an appropriate level. The Tobit regression analysis was used to analyze the causes of efficiency. The greater the capacity and the larger amount of bonus Zn of the refinery, the higher the efficiency of the refinery.

Efficiency Analysis of Zinc Refining Companies

“…In this study, the input and output variables were determined with consideration of both the previous research [8][9][10][11][12]31,32] and the key management indicators used in zinc refinery industry [3].…”

“…The recent slowdown of global economic growth, strengthened environmental regulations, and steadily rising energy costs have made the zinc smelting business environment increasingly difficult and competition among companies has intensified [1,2]. Zinc refineries are emphasizing efficiency as a way to survive and further secure a competitive advantage [3]. Borza [4] identified the common interests of efficiency and sustainability by correlating the objectives to reach an optimum level of efficiency with those creating the conditions for economic sustainability.…”

“…Lately, Park and Kim [3] not only presented the efficiency status of the East Asian zinc refinery based on data from forty-three East Asian zinc refineries, but also identified the factors affecting efficiency. Their findings show that the capacity of the zinc refinery and Bonus Zn, that represents the refinery's production and process technology capabilities to extract extra zinc, are the factors that influence the efficiency of a refinery.…”

“…Their findings show that the capacity of the zinc refinery and Bonus Zn, that represents the refinery's production and process technology capabilities to extract extra zinc, are the factors that influence the efficiency of a refinery. Park and Kim [3] considered only the refineries located in East Asia and did not include refineries owned by East Asian companies but located outside of the region. Thus, by expanding the study of Park and Kim [3] to refineries around the world, we can identify whether cooperation and synergy among refineries belonging to the same company have an influence on efficiency and Bonus Zn recovery.…”

“…We define a primary refinery as a refinery that has the largest production capacity in a company and the remaining refineries are defined as secondary level refineries. According to Park and Kim [3], the efficiency of the smelter is low when its production capacity is small. Thus, even if the efficiency of the primary smelter in the firm is high, the efficiency of the other small smelters in the firm may be low if the effect of production capacity is applied.…”