Teck, Korea Zinc sign annual zinc concentrate deal with TCs at 4-yr highs - sources

Korea Zinc and Teck Resources have signed an annual zinc concentrate supply contract with treatment charges (TCs) at their highest since 2015, sources said.

The deal, which is for concentrates from Teck’s Red Dog mine in Alaska, locks in annual TCs at $245 per tonne basis an outright cash price of $2,700 per tonne, five sources with knowledge of the matter told Fastmarkets.

Scales, which increase or decrease the paid TC level based on cash price movements, were agreed at -2% below $2,700 per tonne, 0% between $2,700 and $3,000 per tonne and +5% above $3,000 per tonne, the sources added.

Teck Resources declined to comment, while Korea Zinc, which is the world’s largest zinc smelting company, did not respond to requests for comment from Fastmarkets.

The deal is up by almost $100 per tonne on 2018’s 12-year zinc TC low of $147 per tonne with zeroed scales. Higher annual TCs reflect a market that has switched dramatically from extreme tightness to oversupply during the past year.

Fastmarkets assessed the spot TC - the discount to exchange prices paid to smelters for processing concentrates into metal - at $270-305 per tonne cif Asia Pacific on March 29, up from just $15-35 per tonne last March.

TCs have risen in part due to the ramp-up of major new mines - Vedanta International’s Gamsberg and MMG’s Dugald River as well as the New Century tailings reprocessing project.

A crackdown on the disposal of smelting by-products in China has created a bottleneck in demand for processing concentrates although the effects are set to fade in the second quarter of this year.

Teck’s customers in Japan have yet to accept formally the TC level of $245 per tonne, which would then constitute an ex-China Asia benchmark number. Smelters there include Mitsui Mining & Smelting and Dowa Metal Mining.

Similarly, the miner is yet to sign annual deals with European clients Glencore and Nyrstar.

Additional reporting by Anna Xu in Shanghai

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