Korea Zinc agrees historic cut in smelting fees in Teck deal
Korea Zinc Co. has accepted a 52% cut in processing fees to turn mined zinc produced by Teck Resources Ltd. into refined metal, in what would mark the lowest benchmark deal for the industry in more than 50 years.
The treatment charge that Korea Zinc will receive for smelting semi-processed ores known as concentrates will drop to per ton this year, down from 5 a year ago, according to people familiar with the matter, who asked not to be named due to the commercial sensitivity of the matter.
The annual deals for concentrates produced at Teck’s Red Dog mine in Alaska are often used as a reference price for other agreements in the zinc industry. Nominally, it would be the lowest benchmark since 1972 and an all—time low in inflation-adjusted terms, according to CRU Group.
A sharp decline in processing fees could deal a major blow to global zinc smelters, as treatment charges typically account for one-third of their revenues.
The deal follows a collapse in treatment charges in the spot market over recent months, fueled by a rapid expansion of smelting capacity that’s driven up demand for mined ores. With profits plunging, there are growing expectations that smelters will need to dial back output or suspend production entirely.
Major zinc producer Trafigura Group launched a strategic review of its struggling Nyrstar assets in Australia last week and called for government support to keep them running. Glencore Plc is also in the process of reviewing its global smelting assets, citing challenging treatment charges in zinc and copper.
Zinc, mainly used in protecting steel from corrosion, is the world’s fourth most-used refined metal, after iron, aluminum and copper.
source/mining.com
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