December 15, 1997
LME and Faro work for smelters in zinc talks
LONDON, Dec 15 (Reuters) - Zinc smelters are benefiting from lower London Metal Exchange (LME) prices and the restart of the Faro mine to negotiate more advantageous treatment charges (TCs) with miners for 1998, according to analysts at Macquarie Equities.
"Although negotiations are still at an early stage, we would expect most deals to be settled using a base price of $1,100 per tonne, and with a small concentrate surplus likely in 1998, a modest increase in terms appears possible, perhaps to $195 a tonne, a $10 per tonne increase on this year's terms," they said.
According to analysts at CRU International, Japanese zinc smelters opened up negotiations at a $250 TC basis $1,350 with an escalator of 20 cents and a de-escalator of 15 cents.
Macquarie said that lower LME prices would make a revision in the basis price to $1,100 likely.
Using a price forecast of $1,270 for 1998, treatment charges would be realised at around $229, compared to an actual TC of approximately $231 this year, they added.
However, if Faro, which produces 140,000 tonnes a year of contained zinc, does not operate beyond March 1998, the concentrates market may swing closer to balance, Macquarie said.
The mine's operator, Anvil Range Mining Corp , last month said it had agreed short term funding with Cominco Ltd and Glencore to resume lead and zinc production, but only until March.
China also represents a wild card, as increased production made it a net exporter this year, Macquarie said.
"Whether Chinese mine production will remain at this year's level, given the fall in LME prices, remains to be seen."
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From: canoe.ca
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Kent
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