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Gold/Mining/Energy : ZINC The base metal. News and Views. Symbol Zn -- Ignore unavailable to you. Want to Upgrade?

To: Ray Hughes who wrote (33)	2/4/1999 10:02:00 AM
From: Stephen O	Read Replies (1) \| Respond to of 3270

February 3 (Metal Bulletin) -- Miners and smelters remain around $10 per tonne apart in their views of where 1999 zinc concentrates treatment charges should be settled. As the two sides enter the fifth month of negotiations, there appears to be no sign of a breakthrough. Probably only one thing has been agreed so far: that the TC will be calculated according to zinc at a basis of $1,000 per tonne. North American miners have visited Europe in recent weeks but were unable to budge the smelters. Miners are asking for a reduction in the charge to around $160-165 per tonne basis $1,000 from last year's benchmark of around $185-187 per tonne basis $1,100 (or $170-172 per tonne basis $1,000). However, smelters in Europe are actually looking for a slight move the other way, with many targeting a TC of $175 per tonne basis $1,000. Miners said that other issues such as payment terms and escalators are also causing some heartache. Zinc traded at an improved $995 per tonne basis three on February 2 on LME kerb trading. Should the market rise further to $1,000 or $1,050 per tonne the market will be more in balance and the miners, ever-susceptible at low prices, may end up being more compliant and flexible towards the smelters. One miner said that it is working on the assumption of a concentrates deficit of around 87,000 tonnes in 1999, based on a revision of the International Lead & Zinc Study Group (ILZSG) surplus forecast released last year. Since then there have been a number of mine closures or suspensions, while it now seems that Boliden's Los Frailes mine in Spain will not restart as early as expected. "When in October 1997, ILZSG predicted a surplus of 85,000 tonnes for 1998, the smelters wanted to increase the TCs by $50 per tonne. It has to work both ways," one Canadian miner said. Metal Bulletin Research noted a concentrates surplus last year of 15,000 tonnes and is predicting that its initial forecast surplus of 40,000 tonnes for this year may be whittled away into a concentrates deficit. "Whether the market is in surplus or deficit by 30,000 tonnes is pretty irrelevant. The fact is that for now the picture is very finely balanced," a concentrates trader said. Miners are also keen to note that the treatment charge can no longer be a straight reflection of the supply-demand picture because at current zinc prices a reduction in TCs is essential to ensure survival for many mine operations. "If miners don't get help [through a reduced TC] then the supply-demand balance will change throughout the year," another miner added. "Cash is everything. It's one thing that the zinc price is low, but because the problems run right through the whole base metals complex, raising money has become very difficult. Therefore, miners trying to get through the tough times have problems because banks just don't want to lend money to the metals and mining industries. We need to generate cash form our own operations and we can only do that with a TC of around $160 per tonne basis $1,000," one miner reflected. Concentrates traders are watching developments in Italy where the immediate fate of the Crotone and Porto Vesme smelters is still in question. Some market participants spoke of rumours that Glencore may keep Porto Vesme out of action for longer than first thought. "The Italian situation should prove to be a key element in this year's discussions," a European smelter said. Glencore was unavailable for comment. T he "abysmally slow" progress, in the words of one smelter, is pointing towards a TCs summit taking place at the AZA meeting at the end of the month. The view of one concentrates trader was that despite the focus on the convention in California "there will probably not be too many smiling faces at the end of the day there either. Just because everyone is going to get together does not mean the deadlock will be broken there. That's a reflection of how our industry works," he said. Metal Bulletin newsroom, London Tel +44 171 827 9977 Fax +44 171 928 6892 New York Tel +1 212 213 6202 Fax +1 212 213 6273

To: Ray Hughes who wrote (33)	2/4/1999 10:09:00 AM
From: Stephen O	Read Replies (1) \| Respond to of 3270

3 mos LME price up $18 to $1009. Invs new low 312,150 tonnes February 3 (Metal Bulletin) -- The tension in the zinc scrap market remains as players hope the LME zinc price will continue to strengthen. Scrap merchants described the market as "frozen" as uncertainty remains over the future direction of prices. Consumers are wary of buying scrap, which they say is priced to highly in comparison to the LME price, while suppliers say it is still not worth their while releasing material at such low prices. "The market really is in no man's land," one merchant said. One major merchant in Germany said that demand remains strong for scrap there, despite the relatively high price against the LME. German prices for high-grade dross are at 84-86% ($823-843 per tonne) of cash LME and 77-80% ($754-784 per tonne) of cash LME for low-grade dross. Roofing scrap is available as high as 74% ($725 per tonne) of the lowest LME price. "These prices are far too high. For example, two years ago high-grade dross was available for 65-70% of the lowest LME price," the merchant said. European merchants are sourcing their material from wherever they can. Zinc producers are also trying to get any quantity of scrap at any price. Zinc scrap was in short supply throughout Western Europe during January. Ashes are said to be even harder to track down at the moment and are going for 50-55% of the lowest LME value at $490-540 per tonne. Another European merchant said that strong demand for all types of scrap from India is adding to the difficulties of locating material. "The Indians do not mind paying over the odds for scrap. For me the problem is not the price of the material, it is finding it. I too would pay more than the actual cost just to get it to fulfil contracts with my clients. Its not going to be any easier to get it this month as it is usually pretty hard to source scrap in February," the merchant said. European merchants also report that scrap trading in euros has begun quietly but steadily. "A good deal of scrap consumers wanted to get used to the new currency and have been happy to trade in euros since it began. The good rate of exchange between the euro and the dollar has been a help in this," a merchant explained. Metal Bulletin newsroom, London Tel +44 171 827 9977 Fax +44 171 928 6892 New York Tel +1 212 213 6202 Fax +1 212 213 6273