Stockpiles of concentrate zinc are depleting globally and mine supply side is fragile, said Ricus Grimbeek, CEO of Trevali alongside the announcement of a fixed price arrangement with a Glencore affiliate for approximately 25pc of its forecasted zinc production for nine months.
Zinc demand is strongly driven by government infrastructure spending in China. Similar spending is expected in many countries in the mid-term, said the company release on Nov 24. There is a shortage of concentrates with the smelters which pressured them to lower treatment charges.
The annual benchmark treatment charges in 2021 are projected to be lower than 2020 levels. In October, spot treatment charges were around $110/mt, which is 63pc lower than 2020 annual benchmark of $300/mt. Zinc prices are currently hovering on the higher end, coupled with lower treatment charges starting in about 40 days and this puts the company in a good position to benefit from the improvements anticipated for the zinc market, stated the release.
Trevali’s fixed zinc price arrangement is pursuant to an existing offtake agreement with the Glencore affiliate for 59.5mn lbs. The agreement is set for nine months starting April 2021 at $1.23/lb. This hedging program is an extension of the company’s current program which from October to March.