INTL LEAD & ZINC CONF: 10 things we learned

Ten things we learned from the 21st International Lead & Zinc Conference last week in Baoji, Shaanxi province, in China.

A major zinc producer has considered increasing the 2019 refined zinc premium for Chinese customers by up to $20 per tonne, citing an expected tightness in Southeast Asian zinc supply for the first half of next year. Talks are still at an early stage while customers are yet to receive concrete offers.

The refined zinc market is expected to record a slight deficit next year despite new mine supply, the International Lead and Zinc Study Group (ILZSG) said, citing a refined zinc metal output forecast of 13.81 million tonnes for 2019 versus metal usage estimated at 13.88 million tonnes for the year.

In terms of spot deals, certain first-quarter 2019 zinc concentrates parcels were heard to be sold at a treatment charge (TC) of above $160 per tonne into China while Chinese smelters begin winter procurement before local mines in Northern China suspended their operations. As of the end of October, Fastmarkets assessed zinc concentrate TCs at $120-140 per tonne, on a cif Asia Pacific basis, drastically up from $10-30 per tonne on January 26, at the beginning of this year.

Research agency Antaike estimates mined zinc capacity outside China will increase by 700,000 tonnes next year, with Gamsberg, the Century Zinc mine and the Lady Loretta mine acting as major contributors. China’s zinc output is set to expand by 150,000 tonnes of zinc in zinc concentrates, citing increased output from Hunan, Yunnan province.

The financial condition of a major European zinc smelter continued to attract attention at the conference. Its business partners, especially traders, are heard to have requested postponing payment. Miners are mulling ways to lower counterparty risk when dealing with the troubled smelter – possibly cutting tonnages of concentrates sold as well as securing payment from the smelter before shipment.

Profits in the upstream zinc mining and refining sectors has risen by 8% year on year in the first nine months of 2018, while those in the smelting sector dropped dramatically by 69% in the corresponding period, Antaike’s spokeswoman said at the conference, while highlighting the struggles of zinc smelters.

The first 10,000-tonne delivery of commission-grade zinc concentrate – with higher-than-expected lead content – from the Century Zinc mine has arrived in China, destined for a local lead smelter with direct leaching facility, sources said

Vedanta is expected to make its first delivery of zinc concentrates from its Gamsberg mine in South Africa in November, sources said, adding more tonnes into the market.

US lead concentrates, which account for one-sixth of China’s imports, may continue into next year despite Beijing’s implementation of a 10% tariff due to a major producer with US lead assets offering to share part of the tariff with its Chinese smelters clients. The proportion of shared tariffs, as well as an expected adjustment in TCs, will be at the centre of discussion in the coming months. Tight supply has continued to upset high-silver lead concentrate TCs, which dropped to $15-30 per tonne, cif Asia Pacific at the end of October, from $15-35 per tonne at the end of September, Fastmarkets assessed.

Beijing will prohibit the expansion of lead mines and smelters in highly polluted areas, such as along the Changjiang River, resulting in a decline in refined lead output to 4.65 million tonnes by 2020, China Non-ferrous Industry Association said at the conference.