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Zinc miners, smelters spar over supply as 2018 terms delayed

MELBOURNE, Feb 16 (Reuters) - Global zinc miners and smelters failed to reach any benchmark deal on 2018 processing terms at an annual industry gathering this week, and any agreement is likely to be delayed by a month or more as participants haggle over prospects for growing supply in the second half, two industry sources told Reuters.

** Smelters were expected to accept lower fees for processing concentrate into metal, as a crunch in mine supply stretches into a third year. Miners offered aggressive terms and zinc plants held off, hoping that rising supply would strengthen their hands, traders said.

** The fees are usually settled between major smelters and miners at the International Zinc Association’s annual conference, this year in Carlsbad, California. The first contract to be agreed leads the way for other deals, becoming a global benchmark.

** “I think it’s going to be a struggle to agree zinc terms. (In) H2, there is a lot of supply coming online and the smelters don’t want to get stuck with a full year of supply at shitty terms, so going to be a lot of back and forth,” said one trader.

** Treatment charges, the fees miners pay smelters to process their ore, are likely to fall by at least 13 percent to $140-$150 a tonne or below for 2018 term contracts, from around $172 a tonne last year, industry sources told Reuters last week.

** Lower fees would weigh on smelters, such as Belgium’s Nyrstar or Korea Zinc, already grappling with thinning profit margins. But they would offer a further boost to miners, including Canada’s Teck Resources, which have been benefiting from soaring zinc prices. (Reporting by Melanie Burton; Editing by Subhranshu Sahu)