Lower TCs and conservative hedging arrangements weighed on Nyrstar’s 2017 profits, which rose just 5% on an annual basis to €206 million ($253.74 million) in 2017 despite a 38% surge in the average zinc price, according to Nyrstar's results report.

The London Metal Exchange 3-month zinc price increased 29.1% over 2017, from $2,567.50 per tonne on January 2 to $3,316 per tonne on December 29 (the first and last working days of the year).

Nyrstar, which mines zinc for internal processing and purchases concentrates on a spot and annual contract basis, achieved an average TC for total purchased tonnes of $40 per tonne below the $172 benchmark level agreed for 2017.

“We see no reason for that $40 per tonne discount to the benchmark to change,” Rode said of the 2018 TCs negotiation. “We do believe the zinc industry is approaching a turning point in the TC cycle, so we expect TCs to start increasing during 2018,” Rode added.

Rode’s comments come while annual zinc concentrate supply contract negotiations are underway, with smelters refusing to accept a slash in TCs and arguing that the mine supply deficit in previous years is switching to a balance.

“That means in terms of TCs that bargaining power will start to transfer from the miners to the smelters,” Rode said.

Industry sources told Metal Bulletin some initial offers for smelters are as low as $90 per tonne, representing a sharp cut of 50% from the 2017 level , citing uncertain mined zinc supply.

Miners and smelters were said to be closer to reaching an agreement with terms in a $140-155-per-tonne range during negotiations, according to participants at the IZA conference last week.

“We do not see some of the views, in terms of earlier offers the mine made us, as coming to pass. We are pretty confident.” Rode said.

Spot zinc TCs sank to multi-year lows at a $10-30 per tonne level, cif Asia Pacific, amid Chinese smelters' increase in January orders, according to Metal Bulletin’s assessment at the end of last month, which represented a $10 drop due to an extremely tight market.

Last year, Nyrstar, Europe's largest zinc producer, generated 1,019,000 tonnes of zinc metal. This was flat year on year due to the unusual heavy maintenance schedule and unplanned outages at Budel and Hobart.

Meanwhile, its mined zinc output surged 28% to 123,000 tonnes following the restart of Middle Tennessee, which aims to attract would-be buyers.

In 2018, Nyrstar’s output of zinc metal is expected to rise to 1,050,000-1,100,000 tonnes and mined zinc output should hit 160,000-180,000 tonnes.

Its protective hedging arrangement, which applies to 70% of its free metal output, also prohibited Nyrstar from fully capitalizing on the 38% gains in the average zinc price in 2017.