CANCUN, Mexico The zinc concentrates market is a lot tighter than it seems due to quality differences and logistical problems, an executive at Peruvian mining company Volcan Cia. Minera SAA told AMM.
"People are talking about piles of concentrates in China, but ... what kinds of concentrates are those? Some of the concentrates, because of quality, cannot go straight to smelters," Volcan commercial manager Paolo Cabrejos Martin said. "Theres a big regional difference between concentrates, and quality is a big issue right now."
Mining companies typically blend concentrates to filter out materials that smelters dont want, such as arsenic and bismuth. "The typical recoveries have changed as deposits have become more complicated, and offtakers are complaining at the slightest move in quality away from the average," he said.
"Concentrates are not a homogeneous material like metal; theyre different in terms of grades, regions and smelter needs, so you cant really have a number that represents the whole industry," according to Martin, stressing the need for multiple benchmarks.
Teck Resources Ltd., Vancouver, British Columbia, and Korea Zinc Co. Ltd., Seoul, South Korea, last week agreed to a treatment charge (TC) of $210.10 per tonne, based on a zinc price of $2,000 per tonne (amm.com, Feb. 27). While traditionally viewed as the industry benchmark, some companies are resisting locking into deals at the same price level.
"If youre going to have a benchmark, why not an Asian benchmark, a European benchmark and a South American benchmark? I think there should be more than one, as the concentrates market is not as simple as many people see it; having just one TC benchmark price is a tradition, and while the Teck-Korea Zinc business is understandably important, I dont think its representative of the whole world," he told AMM.
Logistics is another factor complicating visibility into the availability of concentrates, particularly in Peru, which ships the raw material through the port of Callao, west of Lima.
"Callao port is a mess right now," Martin said, pointing to long warehouse delays, a lack of storage space and an inability to handle the vessels. With seven to 10 days worth of vessels lining up, "thats more than 100,000 tonnes ... that has already been sold and is ready to go but cant leave Peru because of the congestion. Its not that concentrates are piling up in surplus, theres just a huge warehouse and port bottleneck to get them out."
The congestion is only going to get worse, as shipments to China are set to rise sharply over the next couple of years, he said.
The tightness in the Peruvian market right now will increase once the recently restarted La Oroya complex gets back to full capacity, Martin said.
But the likelihood of future output cuts on the mining side means the companys outlook on zinc is extremely optimistic, he said.
"Mine-side production cuts are coming, and I think what you see on paper with projects isnt what will happen in reality, given various environmental, social, political, logistical and cost issues," Martin added.