Young Poong, the world’s sixth-largest zinc smelter, has been ordered to close down its refinery facility for two months for discharging polluted wastewater without authorization, posing a possible setback in its attempt to take ownership control of Korea Zinc, its affiliate and the world’s largest zinc producer.

Earlier this month, the Supreme Court dismissed Young Poong’s request to nullify an administrative order to shut down its Seokpo refinery in North Gyeongsang Province, upholding a two-month suspension of operation for violating a water conservation law.

“With respect to the court’s decision, the company will prepare for the suspension of operations by paying extra attention to safety,” Young Poong said, adding that it would work on minimizing repercussions from its reduced production of zinc.

According to data from the Environment Ministry, cadmium exceeding the river water quality standard by up to 4,578 times was detected near the Seokpo plant in April 2019.

“At the time, the relevant authorities confirmed that cadmium from the facility contaminated the soil and groundwater through the factory floor and leaked into the Nakdong River,” a source familiar with the case said. “Without any official apology for the incident, Young Poong has been filing suits to reverse administrative punishments for five years.”

Since 2013, Young Poong’s Seokpo site has been involved in 76 violations of environmental laws including the release of cadmium heavy metals into the Nakdong River.

The two-month operational suspension is the heaviest punishment it has faced so far and follows a 10-day shutdown in 2021.

The order for a temporary halt in production comes as Young Poong stands at a critical juncture with its ailing balance sheet and a power struggle over Korea Zinc, which has been prolonged due to strong resistance from the firm’s management.

The shutdown of the site with an annual capacity of 325,000 tons would further expand its operating losses, which stood at 170 billion won ($122 million) last year.

Concerns have been mounting that the Young Poong smelter’s suspension could disrupt the supply chains of Korean industries as zinc is widely used to prevent corrosion in steel products such as tubes and wires.

Korea Zinc and Young Poong took up 56 percent and 37 percent of the country’s zinc market last year, according to a business report from Young Poong.

With Young Poong’s lax safety protocols and environmental negligence increasingly coming into the limelight, the firm's assertion that it would rehabilitate Korea Zinc's poor governance after its acquisition is losing credibility.

The refinery in question is also waiting for an administrative order after the Ministry of Environment found on Nov. 4 that it had operated without using its detectors for sulfuric acid, a hazardous pollutant emitted during the process of extracting zinc from imported ore.

On Monday, Young Poong shareholders and a civic group filed suit with the Seoul Central District Court seeking compensation for damages against five current and former directors of Young Poong in relation to the Seokpo plant's violation of environmental laws.

The plaintiffs seek to hold the executives accountable for damages including a 28 billion won fine from the Environment Ministry in November 2021 and recovery costs incurred by the company for illegally discharging cadmium-contaminated water from the zinc manufacturing plant into the Nakdong River for several years.

"What Young Poong has done is not a coincidence. These are planned crimes," the civic group Solidarity for Economic Reform said in a statement.