"We may be out of a crisis, but it's unlikely that Asia will see a quick turnaround," said a zinc trader.

"In the past some countries enjoyed annual economic growth of 5-10 per cent, and zinc demand expanded accordingly. Now many, including Japan, are wondering if they could achieve zero growth instead of negative growth next year," the trader added.

On Friday, London-based minerals group Billiton Plc said Mitsui had withdrawn from the smelter project in the Eastern Cape province because of troubles at home.

Mitsui and sister firm Mitsui Mining & Smelting Co Ltd, Japan's largest zinc producer, had a 24.5 per cent share of the undertaking. Spokesman of both companies confirmed the decision to withdraw from the $560 million project to build a 250,000-tonne-per-year smelter after a two-year investment. "The economy athome has slowed down. Things in Southeast Asian countries, our turf, aren't good either," said a spokesman at Mitsui Mining & Smelting.

"Though we aren't worried about the medium or long term, things are too bad at present. There're other things we should be doing," the official said. Traders are now braced for a nearly 20 per cent plunge in 1998 Japanese zinc demand, bruised by a slump in the construction and automobile industries.

Few expect a major recovery in the next few months, despite as light upturn in zinc demand related to public spending projects and exports of galvanised steel sheets to Southeast Asia. "We heard that in September or October things were slightly better in some areas related to road construction," said another smelter trader. "Yet it's far from offsetting falls in other areas."

The first trader added: "As everything hinges on the car and construction sectors, it's unlikely that we'll see an improvement," said the trader. "Private spending is still very poor...domestic zincdemand will remain stagnant."

With domestic smelters scheduled to prop up zinc output to 650,000 tonnes next year from 630,000 tonnes this year, traders say Japan needs to continue large exports to neighbouring countries, while slashing imports of low-priced foreign metal. "We will export about 70,000 tonnes next year to countries, like Taiwan, the Philippines, Malaysia and Singapore, though Indonesia doesn't look good at present," said an industry source.

"The problem is the year after next, not next year. If Korean Zinc (Co Ltd) starts operating the 170,000 tonne-per-year smelter in Townsville, Australia and if (Asian) demand remains more or less at current levels, it will have a major impact," the source said.

Traders said a slowdown in Chinese zinc exports had helped Japanese traders win some spot export contracts to neighbouring countries, particularly after slumps in prices on the London Metal Exchange (LME).

Yet sound demand from Taiwan and growth in China would at best cancel out declines inother countries in eastern Asia where Korean Zinc, Thailand's Padaeng Industry Plc, and Australian rivals were locking horns with Japanese suppliers, they said.

Official data showed Japanese zinc exports stood at 6,220 tonnes in October, compared with 6,821 tonnes in September and 22,905 tonnes for the whole of 1997.

Of the October total, special high grade (SHG) zinc accounted for 3,384 tonnes, with 2,600 tonnes heading for Taiwan and 499 tonnes to the Philippines. No SHG zinc was shipped to Singapore after 1,513 tonnes in September, the data showed.