Zinc treatment, refining charges seen high on rising mine supply

KUNMING, China (Reuters) - Zinc treatment and refining charges are expected to stay at high levels due to rising mine supply from Australia and South Africa, Chinese smelters, overseas miners and traders said this week at an industry gathering in China.

Next year’s annual zinc TC/RC benchmark is expected to be higher than this year’s, which was agreed between Korea Zinc and Teck Resources at around $245 per tonne, but not quite as high as current spot levels of almost $300 per tonne, Duncan Hobbs, research director at trading house Concord Resources Ltd said.

“TCs are expected to remain high and annual benchmarks are going to be trending higher probably for the next few years,” Oliver Nugent, analyst at Citi in London said adding, “mine supply should be outpacing smelter capacity and rebuilding concentrate stocks for the next couple of years.”

He added that recent increases have been driven by smelter bottlenecks but going forward increased mine supply will be the predominant driver.

Wood Mackenzie expects zinc concentrate to remain in surplus in 2020, with around 1 million tonnes of annual capacity to be added by 2023. Last year’s global supply was just under 13 million tonnes.

A source with one trading house said Chinese zinc smelters have been offering TCs at around $300 for concentrate supply in the first quarter of 2020. But most traders said they were in no rush to make a deal ahead of more industry gatherings this month.

A Chinese smelter source said more mine supply will come online and smelter output will not improve much. But he said there was not much room for the TC to go higher.

The International Lead and Zinc Study Group will host a conference in Lisbon next week, before the flagship LME Week event takes place in London at the end of October.

Spot TCs, or fees that miners pay smelters to process zinc ore into refined metal, have climbed relentlessly in 2019 to an 11-year high of $290 a tonne, as fast-rising mine supply overwhelms limited smelting capacity.

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