Zinc Calcine Processing Fees Continued to Decline in Q3, with the Downtrend Expected to Ease in Q4 [SMM Analysis]

SMM, October 19:

In the third quarter, zinc calcine processing fees continued to decline amid tight supplies of zinc-bearing raw materials and increased procurement demand from smelters. How will the market perform in the fourth quarter?

In Q3, seasonal maintenance at steel mills tightened supplies of zinc-bearing raw materials, keeping zinc calcine production relatively low. On the demand side, zinc concentrate treatment charges continued to fall, prompting smelters to increase zinc calcine purchases to supplement their raw material supplies. Meanwhile, some hydrometallurgical secondary zinc producers became more willing to resume production, further tightening the overall market balance and driving processing fees lower.

In Q4, zinc calcine production will depend on the progress of steel mill maintenance and the availability of zinc-bearing raw materials. If raw material shortages persist, producers will have limited room to increase operating rates. However, the continued decline in processing fees may encourage producers to raise output, providing some support for production.

Zinc calcine processing fees are expected to remain under downward pressure in Q4, although the scope for further declines may be limited. On the supply side, expanded maintenance at steel mills could further tighten supplies of zinc-bearing raw materials, constraining zinc calcine production. On the demand side, if zinc concentrate treatment charges remain low, smelters are likely to maintain their demand for zinc calcine as a supplementary raw material. Meanwhile, changes in sulfuric acid prices will affect the production incentives of hydrometallurgical secondary zinc producers and, in turn, their procurement demand for zinc calcine.

However, continued declines in processing fees may encourage some producers to increase output, creating the potential for a partial recovery in supply. Meanwhile, downstream buyers have limited acceptance of high-priced raw materials and may adjust their procurement pace if costs rise further, limiting further declines in processing fees.

Overall, the zinc calcine market is expected to remain relatively tight in Q4. Processing fees may continue to face downward pressure, but the scope for further declines is expected to narrow.