MB ZINC CONFERENCE - Volcan sees zinc prices above $2,000/t in Q4 - Cabrejos

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Vicky Chenvicky.chen@fastmarkets.comPhysicals Reporter+44 (0) 20 7337 2141

Madrid 11/05/2016 - Tightness in the global zinc concentrates market has yet to have an impact on the refined market so far this year but prices will move above $2,000 in the fourth quarter, Volcan Cia Minera commercial manager Paolo Cabrejos said.

"In the third quarter, if not earlier, we are going to cross the $2,000 mark. We think that average prices in the fourth quarter will definitely be above $2,000," he told FastMarkets in an interview on the sidelines of MB's zinc conference here.

"We see an extremely tight market for zinc concentrates. We have seen treatment charges (TCs) going from $200 to around $120 - it's a massive change," he said. "But we do not see an extremely tight market for metal although stocks on the LME have fallen."

The LME stocks total does not give a full indication, he added - with most of the stock moving off-warrant, the inventory picture is incomplete and therefore ambiguous.

"We are going to see a tighter market [but] I believe that the market are not so sure about it - they are waiting for some signals such as the closure of smelters. We knew it's going to come but it's a matter of when," Cabrejos added.

A stronger zinc price would require more support from funds and money managers rather than from producers, merchants and consumers, he said.

"Funds and the other side of the business who could have an input on prices are waiting for some signals. In theory, zinc has the fundamentals as the market is going to tighten but they are not 100 percent sure as they do not want to make the same mistake as they did a couple of years ago," he said.

Consolidation around $2,200 per tonne would be an incentive for Glencore to bring back its idled production, Cabrejos also said.

"It's not like there is a trigger price - it's more of a consolidation status. If you reach $2,300 as we did last year and remain there for two or three weeks, that does not tell you anything," he said.

"If you have sustained levels above $2,200 per tonne for quite some time, it would be an incentive for some of the low-cost projects but it would need consolidation above $2,500 for higher-cost projects," he added.

Volcan's current cash costs for co-products are around $1,370 per tonne, down 11.1 percent from 2014, due to a series of cost-reduction schemes. Its by-product cash costs are around $975 per tonne, a year-on-year drop of 11.4 percent.

Volcan expects to produce 295,000 tonnes of zinc metal in concentrate while lead in concentrates will be around 100,000 tonnes alongside 23.5 million ounces for silver and around 5,000 tonnes of copper.


(Editing by Mark Shaw)



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