China’s Zinc Smelter Purchasing Team Sets Processing Fees Amid Profit Challenges
China's Zinc Smelter Purchasing Team (CZSPT) has set the domestic processing fees for zinc concentrate at between 2,000 yuan ($281.57) and 2,500 yuan per metric ton for the first quarter of 2025, according to media reports. The new fees reflect the industry's ongoing difficulties, including tight ore supplies and declining smelting margins.
For imported zinc concentrates, the processing fees have been set at $10 to $30 per dry ton, as reported by several news agencies. These fees play a crucial role in determining costs for smelters as they refine raw zinc concentrate into usable metal. The announcement highlights the increasing pressure zinc smelters are facing, as processing fees continue to diverge from actual operational costs.
As part of broader efforts to stabilize the industry, Chinese smelters have focused on fostering greater self-discipline within the sector. Recent discussions have centered on the widening gap between processing fees and rising production costs, a problem exacerbated by the current market conditions.
In August 2024, a meeting among smelters addressed the deteriorating profitability in the sector. Participants underscored how falling processing fees, due to constrained zinc ore supply, had eaten into profits. To manage these challenges, smelters agreed to delay new production capacity and adjust maintenance schedules as cost-saving measures aimed at preventing further financial strain.
Another major topic during the meeting was the possible introduction of a floor pricing mechanism for zinc concentrate treatment charges. This proposal aims to create a more predictable pricing structure, ensuring fees are better aligned with production costs and providing sustainable profit margins for smelters.
The zinc smelting sector's ongoing difficulties are part of broader global commodity challenges, including supply chain disruptions and price volatility. While the processing fees for the first quarter of 2025 offer some short-term clarity, ongoing discussions on a pricing floor indicate the industry's acknowledgment that further structural adjustments are needed to safeguard long-term financial stability.
In summary, China's zinc smelters are contending with rising production costs and declining profitability, prompting adjustments in processing fees for early 2025. These changes are part of broader measures to address financial pressures and ensure stability in a challenging market environment.
