The 2014 benchmark zinc treatment charge is likely to be at least $10 above last year's benchmark TC, sources said Tuesday at the International Zinc Association conference Tuesday in Dana Point, California.
Sources put the likely 2014 TC -- the fees mines pay smelters to process zinc concentrates into refined metal -- at $220-225/mt, while others put this year's fee as high as $230/mt, compared with the 2013's benchmark of $210.50/mt settled by zinc miner Teck Resources and South Korean smelter Korea Zinc. The LME base price will remain steady at $2,000/mt, the sources added.
"The individual TC [deals] will depend on the quality of the concentrate," said a source attending the conference.
Some analysts said the emphasis in this year's negotiations will be on smelters' share of the revenue generated through sales of refined zinc and less on the TC.
Smelters "will still be looking to try to redress some of that revenue share that has gone toward miners over the past 20 years," Macquarie analyst Colin Hamilton recently said in an interview.
Price participation is typically built into a TC agreement through mechanisms called escalators and de-escalators, which add to or subtract from the price based on fluctuations in the LME base price. In the 2013 benchmark deal, escalators were 6% for zinc prices at $2,000-2,500/mt, 5% for a price at $2,500-3,000/mt, 2% for $3,000-3,500 and flat for levels over that mark. De-escalators settled at -2% for a zinc price at $2,000-1,500/mt and flat for prices below that range.
Earlier in the year, some market analysts predicted the 2014 TC would be roughly flat with last year's TC, as zinc smelters' significant advantage from past years starts to fade with the market's concentrate supply overhang.
