Zinc concentrate terms at 5-mth high, lead conc TCs dip on open arbitrage

Zinc concentrate treatment charges (TCs) rose to their highest level this year in May, with smelters refraining from purchases of spot tonnages. And the upward trend in lead concentrate TCs reversed after an import arbitrage opened up in China.

Both markets remained extremely tight in concentrates, with some smelters seeking to cut back their capacity utilization rates, Metal Bulletin heard on Wednesday May 30.

This is particularly true in China, where major smelters such as Bayin Nonferrous, Dongling and Hechi Nanfang have toned down their production.

Chinese zinc smelters traditionally consume the majority of concentrate produced in the domestic market, and top up this supply with spot imports, but so far this year smelters have done their utmost not to bring in concentrates from abroad.

Premiums for zinc ingots in China are rising but, with prices around 300 yuan ($47) per tonne, smelters that rely on imports are not enjoying much in the way of a premium + TC margin, which is their traditional profit base.

Metal Bulletin assessed treatment charges on a cif China basis at $20-35 per tonne on May 25. This was up from $15-35 per tonne in April and reflected a lack of spot deals reported at prices of less than $20 per tonne.

“Smelters are resisting. They’re all waiting until the last minute to buy,” one trader said.

Smelters were largely bidding around $40-45 per tonne but deals are being concluded at prices below that level.

For mine sales, one tender for Australian zinc concentrates, for June-July shipment, was concluded in the mid-$20s, reflecting a lack of nearby bullishness on TCs among merchants.

Peruvian miner Volcan announced on Tuesday that it had temporarily suspended its Animón and Islay mines, part of its Chungar subsidiary. The mines produce 96,000 tonnes per year of zinc in concentrate and 20,000 tpy of lead in concentrate.

In the Chinese domestic market, TCs rose slightly in the north of the country to 3,600-3,750 yuan ($561-584) per tonne. Mine supply in the region has started to increase after delays earlier in the second quarter, smelters in the country said.

Meanwhile, in the south of China, terms remained at rock-bottom levels of 3,200-3,400 yuan per tonne. Better mine supply in the north of the country has yet to work its way through into a looser concentrate market there, and import volumes remain minimal.

An arbitrage to bring zinc into China was closed at the time of pricing, but subsequently opened to $32 per tonne on May 30. This could encourage buying but it remains to be seen how willing smelters will be to increase their production rates, trade sources said.

Open arbitrage window swings lead TCs lower
Lead TCs sank toward the end of May when an arbitrage window opened up to ensure profitable imports of the metal into China.

The Shanghai Futures Exchange’s active-month lead contract rose from a nine-month low of 18,110 yuan per tonne on April 25 to a seven-month high of 20,465 yuan per tonne on May 21, driving demand for imports of ingots and concentrates.

The Chinese domestic lead market is still tight, and is showing the effects of the country’s environmental crackdown.

“China launched its Blue Sky Plan this year and updated its regulations on environmental protection. Many recycled lead factories were forced to close, and this added more stress to a tight lead concentrate market,” one smelter in Northern China said.

Metal Bulletin assessed low silver lead concentrate TCs at $15-25 per tonne on May 25, down marginally month on month.

Terms for high silver-content lead concentrates dropped by $10 per tonne, to $10-25 per tonne.

“The lead market is really hot these days following a better arbitrage window, and we have seen lead traded volumes increase sharply since last week,” one trader based in Shanghai said.

The continued lack of availability of lead concentrate was reflected in Hecla’s tender for Greens Creek lead concentrates; which was said to be concluded at single-digit TCs and silver RCs of $0.35, and including a substantial component for zinc content.

“The purchase side is just crazy; lead is super-scarce,” the first trader said.

Chinese customs agents reported that they had impounded 16,000 tonnes of secondary waste material shipped into the country from miner-trader Glencore.

Two Glencore executives were detained as part of the clampdown, sources with knowledge of the matter said.

“China prohibited the import of solid waste almost nine years ago,” one trader in Northern China said, “but inspections have become much stricter.”