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The zinc industry gathered in Arizona this week for the annual IZA meeting, with over 300 delegates attending in a big rebound for the event following the pandemic. According to our latest information, talks between Teck, Korea Zinc, Glencore and Trafigura did not achieve a settlement for the zinc treatment charge benchmark, though we understand numbers were tabled; at some distance apart. There is no disputing that the numbers will increase compared to last year’s $230/t after a period of heavy smelter disruption and mine supply growth saw spot terms rise quickly during 2022. While spot terms have been under downward pressure in recent weeks due to European smelter restarts and some problems at the mines, favouring the miners’ side of negotiations, smelters insist that concentrate availability is very good and point to mine supply growth being set to exceed smelter consumption growth in the next few years. Recent news that certain Yunnan zinc smelters have been ordered to curtail output due to power supply problems in the province also aid the smelters’ cause.
In other discussions, we found zinc metal demand levels more stable than feared, with acknowledgement of some softness in Europe but more activity in North America. That said, with a number of smelter production and production quality problems in the North American region last year, consumers were motivated to ensure they were covered for the next few months, inferring that spot refined zinc activity will be very thin in the first half. Chunky imports of Korean and Australian metal late last year have already arrested the premium rally and US Midwest has begun to descend towards 30c/lb having peaked at close to 40c/lb in summer last year. With freight rates having collapsed, there is a clear arb for material to travel from Asia to north America and Europe for their high premium levels and this is beginning to be seen. With customers already well covered, we tend to think there will be a continuation of the slide in premiums throughout the year in both continents.
On the macro side, delegates acknowledged headwinds f