Foreign media reported on June 20, it is reported that the closure of the Tara zinc mine in Ireland tells us how much the price of galvanized metal has fallen in the past year.
Foreign media reported on June 20, it is reported that the closure of the Tara zinc mine in Ireland tells us how much the price of galvanized metal has fallen in the past year.
The London Metal Exchange (LME) three-month zinc price hit a record high of $4,896 per tonne in March 2022. Since then, gold has more than halved, hitting a near three-year low of $2,215 in May.
Weighing on the market are the twin factors of weak demand and rising supply, with refinery output returning after a year of shutdowns.
The focus on the smelting part of the supply chain seems to have blinded the market to the impact of sharp price declines on mine profitability.
On June 13, Swedish producer Boliden announced that it would immediately carry out care and maintenance on its Irish operations, and zinc prices in London rose 5% to $2,491 a tonne.
The closure is unlikely to alleviate the immediate oversupply of zinc concentrate, but it is a sharp reminder to the market that zinc prices are teetering on the edge of the mining production cost curve.
Tara's perfect storm
Mr Boliden said Tara Mines, which is based in County Meath, was "currently cash-flow negative due to operational challenges, lower zinc prices, high energy prices and general cost inflation".
The company's chief executive Gunnar Nystrom told Ireland's RTE radio it was a "perfect storm" that led to "huge unsustainable losses".
"The zinc market seems to be very volatile at the moment," Nystrom said. Given the scale of the price collapse of the past 15 months, that is an understatement.
It doesn't help that smelters are also charging miners more for turning concentrates into refined metals.
The global benchmark processing fee is set at $274 per ton this year, up from $230 in 2022 and $159 in 2021.
oversupply
The sharp rise in processing fees reflects the build-up of raw materials as several smelters shut down, particularly in Europe where energy prices are high.
Some European smelters remain offline, but Chinese producers are ramping up output after absorbing excess concentrate.
China's imports of zinc concentrate rose 13 per cent last year and 21 per cent in the first four months of 2023 to 1.54 million tonnes of bulk weight.
So far, China's smelters appear to have avoided a repeat of last year's energy-related restrictions, with refined zinc production rising 8% to 2.674 million tons in the January-May period, according to Chinese data provider Shanghai Metal Markets.
Fastmarkets assessed spot smelter processing conditions in China at $195 to $230 a tonne, below the annual benchmark. Smelters are said to have ample reserves of raw materials.
The Tara mine produced 103,000 tonnes of zinc concentrate last year, and the loss is unlikely to have much direct physical impact on these dynamics.
Attention cost curve
However, it is a warning that zinc falls to the pain threshold for producers in a very short time.
According to Refinitiv, which is owned by LSEG, total production costs for zinc miners tracked averaged $2,179 per tonne in the first quarter of 2023.
This is a weighted average calculation.
Each mine has its own unique cost dynamics, and Tara's funding challenges have been exacerbated by operational challenges, the most recent being flooding in late 2021.
