Lead, zinc TC benchmark negotiations continue amid aggressive bids, offers

The 2021 annual benchmark negotiations for lead and zinc concentrate treatment charges (TCs) continue, with aggressive bids and offers reportedly being pushed by major miners and smelters.

Benchmark TCs – fees paid to smelters for processing concentrate into refined metal – are usually thrashed out over sunny golf courses in the US states of Florida and Arizona in February-March each year, but Covid-19 has driven these negotiations online, hence the longer-than-usual negotiation period in 2021.

High-silver lead concentrates TCs are being offered to Asian smelters at $120 per tonne, with a silver refining charge (RC) at $1.50 per oz, a source with knowledge of the matter told Fastmarkets.

A second source concurred that high-silver lead concentrates TCs were being discussed at a range of $120-150 per tonne.

A miner source said a high-silver lead TC of $120 per tonne is “aggressive”, and that he was expecting a number closer to $140 per tonne.

For low-silver lead concentrates TCs, a third source close to the negotiations speculated it may be in the range of $100-120 per tonne, with an RC of $1-1.50 per oz.

For comparison, annual lead concentrate TCs settled at four- and five-year highs in 2020.

The 2020 low-silver lead concentrates TC was set at $175 per tonne and a silver refining charge at $1.50 per oz for Red Dog concentrates, between Japan’s Mitsui Mining & Smelting with miner Teck Resources, which was a four-year high for the material.

The high-silver material lead TC benchmark was set at a five-year high, with the world’s largest lead smelter, Korea Zinc, agreeing annual terms with Australian miner South32 at $182.50 per tonne/$1.50 per oz for Cannington concentrates last year.

Zinc benchmark TC negotiations continue as well, with two sources noting the miner side is pushing for a range of $160-180 per tonne of zinc concentrates. It is not known what numbers the smelters are countering with.

Last year, Teck and Korea Zinc had agreed zinc concentrate TCs at $299.75 per tonne, a 12-year high.

Sources have been unable to comment whether scales, which increase or decrease the paid TC level based on cash price movements, are attached to the benchmark numbers being discussed between negotiators for both lead and zinc concentrates.

Divergence in benchmark, spot TC levels
Spot lead and zinc TCs have seen a marked divergence from the benchmark figures since the Covid-19 pandemic disrupted supply of raw materials from major producer nations.

This divergence has led to increased spot volatility over the last 12 months, with several sources noting that many deals are decoupled from the benchmark figure altogether, and are instead priced on the basis of floating contracts that refer to prices published by price reporting agencies (PRAs) such as Fastmarkets.

“There is very little buying and selling on benchmark level,” a South American zinc and lead concentrates trader said.

Fastmarkets assessed the zinc spot concentrate TC, cif China at $60-74 per tonne on Friday March 26, down by $1-5 per tonne from the previous assessment of $65-75 per tonne on March 12.

Zinc tenders for Dugald River and Bisha material were concluded within the new spot TC range in the last two weeks.

Fastmarkets’ monthly assessment of the lead spot concentrate TC, low silver, cif China was at $80-100 per tonne on March 26, the range unchanged since January 29 this year.

The corresponding assessment of the lead spot concentrate TC, high silver, cif China was also stable at $85-105 per tonne on March 26, similarly unchanged since late January.

Spot TCs for zinc concentrate delivered to smelters in southern China were assessed at 3,700-4,000 yuan per tonne on March 26, stable since the end of January.

Meanwhile, spot terms for zinc concentrates delivered to northern China were assessed at 3,900-4,100 yuan per tonne on March 26, the range unchange since December 24, 2020.

Archie Hunter in London contributed to this story.

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