Spot zinc, lead TCs remain at low levels; initial annual deals signed

The market remains extremely tight for spot concentrates, with mine supply yet to translate into markedly higher terms paid for cargoes.

In China, the domestic zinc market’s delivered TCs fell further, while mines struggled to ramp up and feed demand from northern smelters, which are operating at close to full capacity.

Metal Bulletin assessed zinc concentrates trade delivered to southern Chinese smelters flat at 3,200-3,400 yuan ($505.37-536.95) per tonne, but fees paid to northern smelters trended downward to 3,550-3,750 RMB per tonne from 3,800-4,000 yuan per tonne the month prior.

“Domestic mine supply is not as good as people expected, partly because this year mines came back much later than usual [from the Lunar New Year holiday],” a zinc concentrates trader in China said.

Terms to northern smelters have declined 11% so far this year and are currently at their lowest levels since before November 2017.

Several Chinese smelters, including Jiangxi Copper, Dongling, Sihuan and Bayin Nonferrous, have undergone maintenance in April. Smelter maintenance was advanced in part due to the low premium, low TC and low margin for smelters, sources said.

“There’s limited room to raise the TC. We are feeling the heat,” a smelter source in China said.

April and May are traditional periods for maintenance work at zinc smelters in China, once winter inventory has been depleted.

Zinc smelters may experience some relief in June; South Korean authorities have ordered Young Poong to shut its 300,000 tonne per year Seokpo refined zinc smelter for 20 days in penance for discharging wastewater into a local national park.

Metal Bulletin understands that the company is contesting the order.

TCs for zinc concentrates, on a cif basis, to major East Asian ports traded sideways and remain unchanged from March levels at $15-35 per tonne.

The market continues to weigh additional tonnes hitting the market in the second half of 2018 against an extremely tight spot market.

One example of new mine production coming online is at New Century, which has signed more offtake deals, this time with MRI and Concord Resources.

The Australian company says it has 80% of the expected 507,000-tpy concentrate output committed in contracts and wants to increase this level to 90%, leaving the rest for spot.

Still, the resilience of a low-TC spot market is making some market participants question if and when terms will in fact rise.

“We are at the end of the first four months of the year and spot terms at $20-25 per tonne, cif China,” one mine said. “I don’t see [higher TCs] coming yet.”

On annual contracts, Metal Bulletin understands that Swedish-Canadian miner Lundin has signed annual deals with TCs set in the range of $150-155 per tonne with several parties.

The deals signify the company breaking away from following annual benchmark terms set by Teck Resources.

Lundin traditionally settled 80-90% of tonnages produced annually at benchmark or benchmark-derived terms into Europe and Asia.

This roughly equates to 300,000 tpy of concentrates, which should increase to around 500,000 tonnes once the Neves Corvo mine expansion project is fully ramped up toward the end of 2019.

Lead TCs tick down
Annual deals have also been concluded for lead concentrates; South 32 has agreed to settle contract terms for its Cannington high-silver lead concentrates at $98 per tonne/0.6 cents per lb with smelters in Asia and Europe.

The deals, which are considered a benchmark level for high-silver material, are a considerable drop from last year’s $124.70 per tonne/$1 per lb.

South 32’s contracts are also a reflection of how TCs for high and low-silver lead concentrates have aligned over the past year; Teck secured annual deals for low-silver lead concentrates with TCs at $99 per tonne.

Spot TCs for high and low-silver concentrates have traded at the same TC level, with different refining charges (RCs) for silver.

Current spot levels on a cif China basis are at $15-30 per tonne for low-silver concentrates, moving down from $20-35 per tonne at the end of March, with several deals done into the Chinese market this month.

Meanwhile high-silver lead concentrate TCs softened $5 per tonne at the top end of the range to $20-35 per tonne, cif Asia Pacific, on April 27.

Additional reporting by Hui Li in Shanghai.