Zinc smelter fees seen rising amid sufficient supply

The fees that zinc smelters charge mining companies to refine the metal will probably rise 4.5% this year amid adequate supplies.

Smelters including Korea Zinc Company and producers such as Teck Resources Limited are in annual negotiations at an International Zinc Association industry conference over charges convert semi processed ore into finished metal.

The benchmark treatment charge may climb to about USD 220 per tonnes based on a zinc price of USD 2,000 per tonne according to the average estimate of 10 respondents surveyed at the conference in Dana Point, California. The fees were USD 210.50 last year on a price of USD 2,000.

Supply will exceed demand by 132,000 tonnes this year, before rising consumption and slowing production growth push the market into deficit in 2015. The fees to refine semi-processed ore, also known as concentrate, generally climb when supplies of ore increase because miners are competing for limited smelting capacity.

Mr Mu Li a commodity analyst at CPM Group in New York said that “The outlook for the zinc surplus, along with increases in labor and energy costs for smelters, will underpin treatment charges this year. There’s still quite a bit of available metal in the market. You’re not seeing a deficit yet, so supplies for this year will be enough to keep treatment charges firm.”