Japan smelters remain bullish on 1998 zinc terms
By Nao Nakanishi
TOKYO, Nov 27 (Reuters) - Japanese smelters remain bullish over 1998 zinc treatment charges
after talks with Pasminco Ltd (PAS.AX) and ahead of negotiations with other suppliers, including
Cominco Ltd (Toronto:CLT.TO - news), later this week.
Traders said on Thursday the smelters and Pasminco remained wide apart on terms for next year
after a second round of negotiations in Tokyo this week, although they would not disclose the
amount of the difference.
''We're still planning a rise of $10 to $15 (per tonne from this year),'' said one zinc concentrate
trader at a smelter.
"The outlook certainly speaks for smelters next year."
Another trader at a smelter agreed, saying: ''There's no question that they will rise. I wouldn't be
surprised if they go up by double digits.''
Japanese smelters are particularly encouraged by a financing deal agreed last week for the Faro
Mine in Canada, owned by Anvil Range Mining Corp (Toronto:ARO.TO - news).
The mine, which produced 345,700 tonnes of zinc concentrates in the 14 months to December 31,
1996, had been temporarily shut down due to lower-than-expected base metal prices and a strong
Canadian dollar.
''Now it's more certain that the Faro mine will operate at least until March. Even if their product
does not come directly to the Far East, it means there are more materials available in the market,''
the second trader said.
''Terms on the spot market are also improving. Terms there are already $5-10 better than the
benchmark deal of this year,'' he added.
Industry sources confirmed an opening offer from Japanese zinc smelters of around $250 per tonne,
basis $1,350, with escalators and de-escalators similar to last year. This would be a rise of $15 on
1997 terms of $185, basis $1,100.
They said talks might now centre on escalators and de-escalators, especially as prices for refined
zinc showed wide fluctuations over the last several months.
''There will be tough negotiations on the scales,'' said one trader at a European house. ''The base
price set by Japanese smelters is fairly high. The question is how they (Japanese smelters) can cut
de-escalators.''
Three month zinc on the London Metal Exchange (LME), which had climbed to $1,650 per tonne
in July, hit 9-= month lows of $1,140 on Wednesday before finishing at $1,167.
Last year, the escalator was settled at 20 cents for every dollar above the basis price and the
de-escalator at 15 cents, in line with agreements set between France's Metaleurop SA (PNRY.PA)
and Canada's Cominco Ltd (Toronto:CLO.TO - news).
This was a jump from an escalator of a maximum 15 percent and a de-escalator of less than 10
percent for Japanese smelters in the past.
Industry sources said no agreement was likely during planned talks later this week with other
suppliers, while Japanese smelters were to hold the next round of negotiations with Pasminco in
Australia before Christmas.
However, a trader at one of Japan's leading trading houses said: ''The key will be negotiations with
Mount Isa.''
Despite delays in shipments from the Mount Isa mine, which is nearing the end of its life, it will have
supplied close to 170,000 tonnes of zinc concentrates to Japan this year, compared with about
70,000 tonnes of Pasminco, he said.
The next round of talks over zinc concentrates from the Mount Isa mine, owned by MIM Holdings
Ltd (MIM.AX), is scheduled for mid-December in Tokyo. |
