HONG KONG, June 21 -- Treatment charges for spot zinc concentrate imports to China, the world's top refiner of the metal, have halved in the second quarter due to reduced supplies, smelter officials and traders said on Friday.
Lower charges paid by overseas sellers of zinc concentrates to Chinese smelters to process material, and a 20 percent fall in domestic refined zinc prices in the current quarter, could spur the smelters to cut production in coming months, they said.
"We have discussed about a possible production cut," said a trader at a 200,000 tonnes a year zinc smelter.
"We think the TCs are too low now. Refined zinc is not easy to sell and the price is low," he said, adding that many Chinese zinc smelters would consider cutting production should prices and treatment charges to stay low.
Spot zinc concentrate is offered to China at treatment charges of $80-$90 a tonne, versus $160 in late March and more than $200 at the beginning of the year, traders and smelter officials said.
"If today we imported at a TC of $90, we would make a loss of about 1,000 yuan per tonne," the smelter trader said.
Treatment charges offered to China started dropping significantly after an international tender was sold at a treatment charge of $95-$99 in early June, a trader at an international trading firm said, adding Chinese smelters had received spot charges of $120-$140 before the tender.
Smelter officials said Chinese zinc miners had been reducing the sale of zinc concentrate in the domestic market in the past few weeks due to low refined zinc prices, increasing demand for imports.
They said the cost of production stayed at 13,000-15,000 yuan per tonne of zinc metal to zinc miners in China, depending on ore grades, while spot zinc traded about 14,825 yuan per tonne on Friday.
Supply of imported zinc dross, a low-grade material for refined zinc production, have also fallen due to tighter customs checks for impurities, adding to the demand for concentrates, smelter officials and traders said.
"Previously people imported dross to replace zinc concentrates. But now nobody wants to import following the checks," a trade executive at a large zinc smelter said.