London 17/12/2015 - Zinc concentrate treatment charges (TCs) have continued to fall sharply in the past week as the market seeks to replace tonnages lost from mining outages including those from the key Century mine, sources told FastMarkets.
Last week FastMarkets reported that TCs for clean standard-grade zinc concentrate had slipped to $170-180 per tonne, but this week market sources reported that terms were still tumbling, now at $150-165 per tonne.
"The last couple of days have been dramatic, we've seen a $20-30 drop in the past couple of days," a trading source said.
Treatment charges are discounts on the metal price granted to smelters for the costs associated with processing concentrates into metals, they can also serve as an indication of wider supply and demand fundamentals between miners and smelters.
And after a series of shutdowns on the mine side some smelters and traders are scrambling for material to maintain running inventory or for book building, in particular tonnages that correspond with those produced from MMC's Century mine in Australia, which shipped its last zinc this week.
Century concentrates were prized for their easily smeltable low-iron, high zinc content; a production drop off of roughly 450,000 tonnes of zinc metal in this concentrate form is difficult to replace in a smelters feed.
"Chinese smelters are very aggressive at the moment," a mining source said. "The Chinese market is quite tight so they are trying to import some material for the first half of the year."
A tender for Antamina zinc concentrate, also high in copper content, was said to have fetched terms below the $130 per tonne mark this week; although Antamina material typically trades at higher discounts than standard material, the low numbers achieved are indicative of current market tightness sources said.
"Since the middle or late November spot market is dramatically changed and is still shifting," the mining source said.
However some smelters rejected the idea that they would buy spot tonnage at terms currently being quoted, and claimed that they could still buy clean concentrate at TCs of $170-180 or higher.
"We haven't bought any concentrates below $200 TCs, most smelters in China do not want to buy," a Chinese zinc smelting source said.
CONCENTRATE MARKET TURNING TOWARDS DEFICIT
While most smelters are relatively well-covered in terms of stocks for the first half of 2016, the market is expected to slip into a sharp deficit during the second half of the year and the market seems to be turning at the moment.
"The first six months seem to be adequate supply with existing inventories. A lot of metal stocked in Malaysia, Taiwan and China of course as well," a second mining source said.
International Lead Zinc Study Group data released yesterday indicated that supply and demand for October this year had swung into a 15,000 tonne deficit for zinc metal. Current TCs quoted by market sellers are over 17 percent lower than the $185-195 per tonne level seen in that month.
"Given cutbacks, mine closures we should expect monthly deficits to grow in size," FastMarkets' head of Research Will Adams said today.
(Additional reporting by Meimei Qin, editing by Tom Jennemann)