US benchmark terms for zinc treatment charges, the fees miners pay smelters to turn their ore concentrate into refined metal, have been finalised as the annual American Zinc Association's conference winds down.
The benchmark was set at USD 194 per tonne based on a USD 1,250 a tonne London Metal Exchange zinc price. A steep decline in the treatment charge was widely expected because of severe cutbacks in mine production since the fourth quarter which have limited the concentrate supply.
Market sources said that smelters were willing to settle for a lower processing fee but wanted a greater share of the profits, or a higher escalator, if the zinc metal price rose later in the year.
A deal between Teck and Korea Zinc was said to include an escalator of 12% price participation on the basis of a zinc price of USD 1,250 per tonne. The escalator would increase to 15% if the metal price rises above USD 1,500 per tonne. On the downside, the de-escalator would decline to 10% on the basis of USD 1,250 per tonne, falling to 6% when zinc metal prices fall below USD 1,000 per tonne.
Since October 2008, zinc has traded roughly between USD 1,350 and a four year low of USD 1,051 a tonne hit on December 5th 2008. This year's treatment charges were expected at significantly lower terms than in 2008.
Source: Steel Guru
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