Annual zinc processing benchmark looks bullish but isn’t
Zinc has been the consistent under-performer of the London Metal Exchange (LME) base metal pack since the start of 2025 and this year’s benchmark smelter treatment charge reinforces the galvanizing metal’s bear narrative.
Korea Zinc and Canadian miner Teck Resources have agreed annual fees of per metric ton for the smelter to process Teck’s zinc concentrates into refined metal, according to Bloomberg.
That’s a sharp drop from last year’s benchmark of 5 per ton and the lowest outcome in at least 50 years, according to consultancy CRU.
Given smelters get to charge more in times of raw materials over-supply and less during periods of scarcity, this year’s super-low benchmark might at first glance seem a super-bullish signal.
But only relative to last year’s benchmark deal.
Relative to spot treatment charges, which turned negative towards the end of 2024, this year’s benchmark is a sign that both smelters and miners expect mined zinc supply to recover strongly in 2025.
Benchmark annual terms for processing zinc concentrate into metal
Year of unexpected famine
Last year’s benchmark processing deal, negotiated by the same two companies, was out of date almost as soon as the ink had dried.
Spot treatment charges slumped over the remainder of 2024, touching an unprecedented low of minus per ton in the fourth quarter, according to Chinese data provider Shanghai Metal Market (SMM).
The yawning disconnect with the annual benchmark showed just how unexpected was the shortfall of zinc concentrates.
A year of expected plenty turned into a year of famine due both to price-related mine closures in 2023 and a string of supply hits such as the fire at the big new Ozernoye mine in Russia.
At its April 2024 meeting The International Lead and Zinc Study Group (ILZSG) forecast global mine production to rise by 0.7% relative to 2023. The reality was a 2.8% contraction, marking the third consecutive year of falling output, it said in a February update.
The squeeze on raw materials availability caused global refined zinc production to fall by 2.6% last year, pulling the market into a 62,000-ton supply-demand deficit.
China spot concentrate treatment charges for imports
Mine supply cranks up
Chinese spot treatment charges for imported zinc concentrates have bounced sharply from their late 2024 lows and were last assessed by SMM at per ton.
China’s zinc concentrate import volumes are also recovering after falling by 13% in 2024, the first year-on-year decline since 2021.
Inbound shipments over January and February jumped by 33% relative to the same two months last year.
China has started importing zinc concentrate from the Democratic Republic of Congo for the first time in many years, attesting to the restart of the Kipushi mine, majority owned and operated by Ivanhoe Mines.Imports from Russia more than doubled year-on-year in January-February, suggesting the delayed Ozernoye mine is now also ramping up production.
Improved concentrates availability and recovering spot treatment terms are encouraging Chinese zinc smelters to lift run-rates.
Production of refined zinc in the world’s largest producer fell by 3.4% last year, according to ILZSG.
Output was still down by 3.0% in the first quarter of this year, according to SMM, but the data provider’s latest survey suggests production in March itself was up by 4.0% on March last year. Output is expected to rise even faster in April.
Feeding the bear narrative
If mined output continues to rise, Chinese smelters will be more than happy to process it into more metal.
Which is why zinc is out of favour with metals analysts right now.
Global demand grew by just 0.1% last year, according to ILZSG and zinc’s prospects this year don’t look encouraging.
Zinc’s heavy usage in construction leaves it exposed to a globally weak sector, while demand from the broader manufacturing sector will be buffeted by US President Donald Trump’s tariff turbulence.
The prospect of too much supply flowing into a weak-demand environment is why LME three-month zinc has fallen below the ,600-per ton level for the first time since August and is now down by 13% on the start of the year.
Another surprise?
The scale of the zinc price collapse injects a note of uncertainty into the market’s bear script.
Were the zinc price to fall much further, it would be back at the depressed levels that caused multiple mine suspensions in 2023, contributing to last year’s scarcity.
Zinc supply has proven to be highly price sensitive in recent years, which is why raw material supply-chain dynamics can shift quickly, wrong-footing smelters.
Last year’s smelter processing benchmark proved an unreliable guide to how the zinc raw materials market ended up playing out.
The jury is out on whether this year’s will be any more reliable.
source/mining.com
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