Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Noranda Income Fund owned Canadian Electrolytic Zinc Limited produced 67,425mt zinc metal in Q1, up by  4pc from 64,654mt produced in the prior-year quarter. Sales of zinc metal rose by 5pc to 68,059mt from 64,646mt in Q1 2019. 


Manufacturing activities continued despite the COVID-19 pandemic as the government of Québec deemed the facility as an essential service. As a measure against the pandemic, the company has halted all functions non-essential to the maintenance of its operations since March 25.



For the second quarter of 2020, the company is on target to achieve its annual production and sales guidance. However, the global economic disruptions caused by the pandemic could impact the supply of concentrates, lower commodity prices and zinc processing fees which in turn may adversely impact the company’s operations and revenues. The facility is forecast to produce 260,000mt zinc metal in fiscal 2020.


Zinc prices

Production cut by automakers and slump in construction activities have put the refined zinc market under pressure, according to Wood Mackenzie. The agency forecasts zinc prices at $0.80-$0.95lb throughout the remainder of 2020. Mine closures due to the pandemic have reduced zinc concentrate inventories and pressured treatment charges in March and April, down from around $270-300/mt in early March to $240-250/mt by late March. Indicative spot treatment charges for China-origin imported zinc concentrates decreased to $265/mt in March from $305/mt in December 2019, as per Wood Mackenzie. Imported spot treatment charges in China for April was $185/mt, but are expected to recover in the second half of 2020 as mines restart.


Noranda Income Fund’s unit production cost in Q1 was $490/mt compared to $504/mt in Q1 2019. The fund’s earnings before income taxes (EBIT) were $11.5mn in Q1 compared to a loss before income taxes of $23.1mn in the prior year quarter. 


Noranda Income Fund owns electrolytic zinc processing facility and ancillary assets in Salaberry-de-Valleyfield, Québec. The facility is the second-largest zinc refinery in North America and is operated by Canadian Electrolytic Zinc, a wholly-owned subsidiary of Glencore Canada. As per an agreement between the fund and Glencore Canada entered on March 8, 2018, Glencore Canada will exclusively supply the fund with zinc concentrate and purchases back the refined zinc metal produced by the fund until April 30, 2022.


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