China 2Q Spot Zinc Treatment Charges Down 47% -Standard Bank

BEIJING, June 23 -- Spot Chinese zinc treatment charges have dropped by nearly half over the past couple of months to around $90 a metric ton from $160-$180/ton at the start of the second quarter, Standard Bank said late Tuesday.

The 47% decline in charges reflects much tighter concentrate supplies, Standard's metals analyst Leon Westgate said in a note.

Treatment charges are fees paid to smelters to process the concentrate into refined product. Lower TCs mean lower margins for refined zinc producers.

"The main reason for the decline in TCs appears to be a combination of miners paring back production, or reducing sales in the face of weaker prices, and smelters upping capacity utilization rates in expectation of increased demand," he wrote.

Chinese zinc concentrate imports in May fell 5.6% on month and 25% on year to 223,985 tons. Concentrate imports have fallen 3.6% on year in the first five months.

"Whether the concentrate tightness results in significant smelting capacity closures remains to be seen," Westgate said.

"However, some smelters have already brought forward scheduled maintenance closures, with that trend likely to spread unless outright prices or TCs start to recover."