Zinc miners leverage scarcity to flex muscles over smelters – by Andy Home (Reuters U.S. – May 15, 2017)


LONDON – If there were any doubt that the zinc supply chain is tightening, it should be dispelled by this year’s benchmark smelter treatment charge. The treatment charge is the fee paid by a miner to a smelter for converting mined concentrates into refined metal and it is probably the best indicator of raw material availability; high during times of surplus and low during times of scarcity.

This year’s headline fee of $172 per ton is the lowest in a decade, a firm swing of the negotiating pendulum in favor of miners and a tangible sign that the much-anticipated concentrates crunch has arrived.

Indeed, miners have used the squeeze on availability to make what might turn out to be a historic change in how these annual benchmark contracts are structured. Zinc bulls have been waiting a long time for this supply squeeze and they may have to wait a bit longer before it moves from raw materials to refined metal parts of the chain.

But at a mined concentrates level it has very surely arrived. This year’s headline treatment charge of $172 per ton was confirmed by Belgium’s Nyrstar, a zinc miner itself but a much bigger converter of concentrates into refined metal.

It represented a 15 percent decline from last year’s benchmark of $203 per ton and was the lowest outcome since 2006. The comparison is worth noting because that was the year London Metal Exchange (LME) zinc hit its highest ever level at $4,580 per ton.

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