SINGAPORE: Zinc prices declined on Tuesday as investors were cautious about a possible surge in refined zinc supply as smelters raised production amid attractive margins, while other metals climbed as the U.S. dollar slumped.
London benchmark zinc was down 1.6 percent at $2,860.5 a tonne, as of 0739 GMT, and the most active zinc contract on the Shanghai Futures Exchange dropped 1.5 percent to 22,740 yuan ($3,386.45) a tonne.
Market participants are concerned that supplies of finished zinc will surge after smelters and miners agreed to a sharp rise in the latest treatment and refining charges.
For Chinese smelters, those charges have climbed to about 6,350 yuan ($945.83) a tonne for domestic concentrate from 3,500 yuan at the start of 2018.
"Current profit for the smelters are very high. This will push smelters to increase their utilisation rate," said Dina Yu, an analyst at metals consultants CRU in Beijing, adding Chinese smelters are earning profit of as much as 3,000 yuan ($446.85) a tonne, a record high.
The overall base metal market traded higher after the dollar fell for a second day against a basket of major currencies . Dollar-denominated base metals tend to rise as they are cheaper for buyers paying in other currencies.
FUNDAMENTALS
* On-warrant LME zinc inventories <MZNSTX-TOTAL> rose 6 percent to 46,725 tonnes after touching record lows in late March, according to daily LME data on Monday.
* ZINC SPREAD: The premium for cash zinc over the three-month contract <CMZN0-3> fell for a third straight session to $50 a tonne, data showed on Monday. However, it is still high compared with February when the spread slipped into a discount of $8.25 a tonne.
* Indigenous villagers in Peru who have been blocking MMG Ltd's Las Bambas copper mine for two months will vote on Tuesday to decided whether they agree with a deal signed by their community president and the Chinese miner the day before.
* Anglo American, one of the world's top miners, says productivity could jump by as much as a third at its Chilean copper mines within three years as it rolls out new technologies.
* Benchmark copper rose 0.6 percent to $6,515 a tonne, while nickel gained 0.4 percent, lead was up 0.5 percent and tin advanced 0.3 percent. Shanghai copper ended up 1.1 percent.
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