Volcan zinc concentrates tender shows market tightness

Volcan Compañía Minera succesfully concluded its first tender process for year 2016. Treatment charges achieved for the zinc concentrates were at two digit figures, level not seen for more than two years where they had previously remained for some time below the 100s level. Bidders and market are already acknowledging the tightness of the concentrate market amid 10% of the world mine capacity has faded away. Spot TCs were closer to the 200 mark only 2-3 months ago, to quickly go down below 100s in a matter of weeks. Although the price of the metal does not reflect the market concentrate tightness yet due to the existing metal inventories, bidders were betting on higher prices through base and escalator structures driven in that direction during the tender. The absence of many financial investors on the commodity world has brought metal prices down including zinc, despite the fact that the latter has a bullish story behind it, compared to bigger markets like oil, iron ore or copper, which drive the commodity world in the current down trend. Zinc is unfortunately included in the same basket for the time being, but its fundamentals of supply and demand should prevail and change the current price direction. It should only be a matter of weeks before the refined zinc production will start to be threatened by a lack of raw material to convert into metal. Concentrates availability should start to put more presure on smelters already affected by low metal prices and more environmental restrictions. Once this new order settles, metal prices should start a rebound away from the multi-year lows where they are now. The low investment on new zinc mining capacity during the last years should guarantee a longer duration of the uptrend of the zinc price.