LONDON – The zinc industry has agreed a 15% drop in annual zinc processing fees, the miner and metals smelter Nyrstar said on Thursday, as supply in the tight market dwindled.
The company, listed in Belgium, said in a statement treatment charges for the galvanising metal for 2018 fell to $147/t from $172/t last year. An agreement was reached at the end of April, Nyrstar said.
Mining companies pay treatment charges (TCs) to smelters to have their concentrates turned into refined metal. The charges fall when supplies dwindle as smelters compete to find supply.
Zinc supply has been falling over the last few years as major mines such as Australia's Century and Ireland's Lisheen reached the end of their lives and Glencore cut its own output.
London Metal Exchange zinc rallied 29% last year but is down about 7.5% so far this year.
Zinc treatment charges have a pricing component which are linked to LME prices. Smelters win a percentage increase in treatment charges for every dollar the LME price increases above a set basis price, but if the price falls, TCs also drop, alleviating fees miners must pay in a low price environment.
"A mild drop in annual terms will offer some relief to smelters with reports that many in China are considering extended maintenance amid low fees," said ING analyst Oliver Nugent.