London 22/04/2016 - The spot markets for zinc and lead concentrates has been subdued in April, with treatment charges and (TCs) stable this month.
Attention has mainly focused on annual supply discussions, deals for which have started to be settled in the past few days.
HIGH SILVER ANNUAL DEALS SEALED, TECK SETTLES INITIAL RED DOG DEALS
Spot rates for high-silver lead concentrate were last at $150-165 per tonne on a cost, insurance and freight (CIF) China basis, unchanged from last month - few spot transactions have been completed.
"There is literally no spot business recently, only in the form of tenders," a smelter source said.
For annual deals, South32 has settled 2016 supply contracts for high-silver lead concentrates from its Cannington mine in Australia with Korean smelter Korea Zinc at lower rates, sources told FastMarkets on Wednesday.
The miner cut its TCs by 11.7 percent to $170 per tonne from $192.5 in 2015, with silver refining charge (RC) unchanged at $1.5 per ounce.
And Canadian miner Teck Resources has concluded initial 2016 deals with Korean smelters for low-silver lead concentrates from its Red Dog mine in Alaska with TCs of $193 per tonne on a lead base price of $2,000 and silver refining charges at $1.20 per ounce.
Escalators are set above $2,000 with 6 percent with no upside limit on prices while de-escalators stood at four percent with no floor limit.
Teck also agreed with South32 at a TC of $170 per tonne.
Sumitomo's San Cristobal might also follow suit but the silver RC might be slightly different, sources said.
Spot terms for low-silver lead concentrates remain at $150-165 per tonne CIF China although interest has been scant.
Major Chinese lead smelters have high stocks but smaller ones have been actively looking for supply in the domestic market due to the negative arbitrage LME-SHFE ratio.
"With stronger lead prices nowadays, many smelters will resume production and for sure the market will get tighter because the increase from the smelters will outpace the rise from the miners," a Chinese smelter said.
ZINC SPOT MARKET HOLDS AS SMELTERS PREFER DOMESTIC SHIPMENTS
Spot TCs for zinc concentrate remained at $125-135 per tonne CIF China for the third consecutive month although trading has again been thin.
Chinese smelters are choosing not to take delivery of concentrates from outside of the domestic market and are instead supplementing supply through the domestic market, which is much cheaper although the material is of poorer quality.
So while the increased LME price and falling TCs on the international market have been supportive of domestic mining, local TCs in China are now starting to fall. Local sources pegged them at 5,150-5,350 yuan ($792-823) for spot concentrate tonnages.
"The interesting thing at the moment is that smelters continue to buy domestic parcels, which still have quite high TCs compared to the international price," one producer source said. "There is a downward trend though, because more people have been buying from them the TC is going down," he added.
Deals for 2016 full-year supply of zinc concentrate were agreed at TCs of $203 per tonne between Teck and Korea Zinc, a 17-percent drop from last year's levels and at the same base price of $2,000 per tonne.
Teck also agreed annual terms with Glencore at TCs of $188 per tonne on a base price of $1,500 per tonne; escalators on both the Glencore and Korea Zinc contracts mean both sets of numbers effectively amount to the same level.
Smelters are for the most part choosing to follow the Korea Zinc numbers in their annual dealings with miners.
The drop in benchmark numbers from $245 in 2015 means this year's annual terms are at their lowest since 2012, which reflects tighter supply of zinc concentrates amid mine closures globally.
(Reporting by Vicky Chen and Ian Walker, editing by Mark Shaw)