Zinc miners and smelters reportedly failed to reach a benchmark agreement on 2017 treatment and refining charges this week at the International Zinc Association conference in Rancho Mirage, California.
A major sticking point in the negotiations, according to sources, were the price escalators in his year's fee, amid significant uncertainty in zinc price direction going forward.
Miners and smelters were far apart in their negotiating positions on the fee itself going into the TC/RC talks, sources said, spurring doubts at the outset that the parties would conclude a deal by the end of the three-day IZA forum.
"They're very behind," an IZA attendee said, referring to the lagging talks. Parties were negotiating in a wide range of $100-$180/mt, according to one source, with a range of $140-$150/mt heard later in the conference.
The parties particularly clashed over the level of the fee's price escalators, the built-in adjusters that allow for rises in the zinc price during the year. A miner at the IZA meeting was pushing to exclude price escalators from the 2017 fee, a source said, following other markets like copper, which has eliminated escalators in the benchmark TC.
Another source attending the conference said miners were also pressing for a bigger percentage recovery -- the metal value contained in the zinc concentrates -- to 90% from the current 85%, but he doubted miners would win such a concession in this year's talks.
A source with one of the negotiating parties said a base price of at least $2,800 was likely in this year's TC/RC, reflecting the substantial rally in zinc prices over the last year.
The 2016 benchmark fee was reportedly settled at $188, basis $2,000. Miners went into this year's negotiations with a clear edge carried over from the 2016 talks, when major mines like MMG's 500,000 mt Century mine tapped out.
But a dramatic concentrates squeeze has hit the market during the course of last year, giving miners even more of an advantage in this year's talks, with all signs pointing to a sharply lower fee.
However, analysts said earlier this year that miners would be unlikely to play too heavy a hand in pushing for a fee reduction, as the zinc market's supply dynamics will eventually shift back to favor the smelters.
