o8 offtake delays

No deal yet in zinc treatment charge talks


HAMBURG, March 20 (Reuters) - Talks on 2008 zinc concentrate treatment charges (TCs) remain difficult and no global benchmark deal has yet been reached, European zinc industry and trade sources said on Thursday.

They said there was still strong disagreement over the headline TC fee and de-escalators -- extra charges which protect smelters from a fall in zinc prices.

"We still have no benchmark settlement and European industry is refusing to regard a settlement apparently reached by Korea Zinc (010130.KS: Quote, Profile, Research) as a benchmark," one industry source said."

Korea Zinc was said to have settled at a treatment fee of $300 a tonne based on a London Metal Exchange zinc price of $2,000 coupled with a de-escalator of around six cents a pound.

This was compares to last year's benchmark TC of $300 a tonne based on an LME zinc price of $3,500 a tonne.

LME zinc MZN3 was quoted at $2,300 a tonne at 1620 GMT.

"European consumers are still looking for a considerably higher benchmark fee than the Koreans," one source said. "Europeans are also looking for a significantly higher de-escalator."

"Headline demands are $50 to $75 dollars higher than the Korean settlement are being made."

"With commodity prices so volatile and driven by financial buying rather than industrial purchasing, industry is especially concerned about gaining extra protection against sudden dramatic falls in zinc prices."

Smelters argue there is a considerably higher volume of concentrate available this year compared to early 2007 which justifies a rise in charges.

High rises in European energy prices this year was also provoking smelters to seek higher TCs.

Intensive talks have been underway since January. Traditionally deals are settled at the American Zinc Association Conference in February but this year no general agreement was reached.

"Several large zinc smelters are being especially tough this year in talks," one trader said.

"Recent mergers have created some much larger zinc smelting companies and these have more negotiating muscle with mines than the large number of small size firms we used to have."

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