Shenzhen Zhongjin Lingnan Nonfemet Co, China's fourth-largest zinc smelter, said the fees it charges mining companies to process raw material into finished metal may drop by a third as metal prices plunge.

Zhongjin Lingnan expects contract fees to drop to US$200 a metric ton at a basis price of US$1,000 a metric ton, Han Minzhi, general manager of sourcing, marketing and sales, said yesterday. The fees for 2008 were US$300 at a basis price of US$2,000, according to Macquarie Group Ltd.

Zinc, used to galvanize steel, has fallen 51 percent this year on the London Metal Exchange, Bloomberg News said.

Treatment charges, known as TCs, may drop for the first time in three years as a result and extend losses at smelters.

The global refined zinc surplus widened to 121,000 tons in the first 10 months of this year, from 14,000 tons a year earlier, the International Lead and Zinc Study Group said this month.

China's zinc smelters, which are all unprofitable, have cut production to try to boost prices and ease oversupply. The nation's largest, Zhuzhou Smelter Group Co, reported a loss of 5 million yuan (US$730,000) in the third quarter.

(Shanghai Daily December 24, 2008)