Japan Zinc Smelters Agree to Reduce 2009 Treatment Charge by 10%

Japanese zinc smelters almost conclude the price negotiation with offshore miners to reduce the price condition by around 10% for 2009 shipment from previous year. The smelters won the gain and loss sharing system with higher price than standard.

The price is apparently just less than US$ 200 per tonne for treatment charge based on US$ 1,250 per tonne of price at London Metal Exchange for 2009 shipment. The price level was US$ 300 for treatment charge based on US$ 2,000 of the metal price for 2008. The charge was to decrease 8 US cents per US$ 1 change when the LME price increased to more than US$ 2,000 per tonne while the charge was to decrease by 13 US cents for any US$ 1 charge when the LME price decreased to US$ 1,500 or less.

The treatment charge represented US$ 227.5 per tonne for US$ 1,250 per tonne of LME price in 2008 agreement while the charge is near US$ 200 for 2009. The 2009 charge is around 10% lower than 2008 charge.

The ore supply is more than the demand under the slow economy. LME zinc price has been less than US$ 1,800-1,900 per tonne, which is estimated to be breakeven line for zinc miners. Under the less profitability, the miners conduct major production cut and the ore supply is expected to tighten in second half of 2009.