Zinc treatment charges (TCs) have risen to their highest in almost two years, with lower exchange prices for the metal making smelters in China lower output, while terms for lead concentrates fell with arbitrage trades exacerbating a market significantly short of supply.
TCs, discounts on the zinc price paid to smelters for the costs of processing concentrates to metal, shot up to $65-75 per tonne, basis cif China, in July from $20-40 per tonne in June. The new level is the highest Metal Bulletin assessment for the market since October 2016.Trade liquidity in the market remains low, but demand for spot concentrates has taken a hit due to Chinese smelters toning down production in light of recent collapsing zinc prices.The Shanghai Futures Exchange active zinc contract was at 21,215 yuan ($3,113) per tonne by the close of trading on Monday 30, down 19% in year to date and 14% since the start of June, when international market jitters over US-Chinese trade wars led to a price rout across industrial commodities.Smelter profitability in focusSmelters in China pay for zinc concentrates based on a formula in which they benefit from price participation. Once exchange...