Zinc price tumble erodes concentrate processing fees

SHANGHAI, Aug 20 (SMM) – Zinc concentrate processing fees in some Chinese markets fell below 5,000 yuan/mt in zinc content as of Friday August 17 due to tumbles in zinc prices last week, SMM learned.

A combination of treatment charges (TCs) and discounts to the SMM #1 zinc prices, the processing fees paid to smelters at above 5,000 yuan/mt would help keep smelters operate in the black.

The weekly average of SMM #1 zinc price last week fell 860 yuan/mt on the week, dragging the processing fees down by 172 yuan/mt.

If zinc prices continue to fall, smelters are set to raise TCs during negotiations with miners later this month.

At the end of last month, higher TCs led processing fees to rebound above the 5,000 yuan/mt level.

TCs in Hunan, Yunnan and Guangxi provinces went up 400-450 yuan/mt in zinc content, leading the gains across the country. Smelters across these regions shut down on environmental restrictions, bringing ore materials to be slightly oversupplied.

TCs in Inner Mongolia rose 250 yuan/mt in zinc content as some local smelters underwent maintenance in July-August. Concentrate supply across the region was generally in balance with demand as many smelters in the north bought from Inner Mongolia.

TCs in Shaanxi increased by 100 yuan/mt in zinc content, smaller than other regions, as concentrate supply across the region was relatively tight and as many smelters are located in the province.