Nexa Resources S.A. (NYSE:NEXA) Q3 2019 Earnings Conference Call - Final Transcript
Nov 01, 2019 • 11:00 am ET
[Operator Instructions] Our first question comes from Thiago Lofiego with Bradesco BBI. Please go ahead.
It's actually Isabella here. So I have a couple of questions. First on the zinc market outlook. You mentioned that you expect the refined zinc market to remain a deficit in 2019. Well I was wondering if you could just share a bit of your outlook for 2020? It would be helpful. And also on the temporary increase in SG&A that you registered in the third quarter. I was wondering if you could explain a little bit on what type of measures you are working on? And if possible what future benefits that you're expecting? These are my 2 questions.
Isabella this is Tito. Good morning good afternoon everybody. Two good questions. In 2019 what we've seen in the market is clearly in the case of Asia and specifically China there is an excess of concentrate availability which actually is helping the smelters -- the Chinese smelters. That's why the TCs -- they are both -- they reference TC. We've seen transactions with the TCs action close to $300 per ton. What it means in terms of the general market? The way we see it is that there was an expectation that more smelters in the -- zinc and smelters in China would be in full operation now. Then there was more imports of concentrates to the country. And we are not seeing this additional capacity enter in operational. Because of that there is no change in the stocks -- in the stock availability of zinc either in LME and in Shanghai. We are with the lowest levels ever of zinc in the market. And it in some ways explains why price of zinc has been resilient. I mean we're talking about 2500000 per ton in a period of time where most of the analysts are saying that price should fall but the market is proving that there is a reason to -- for price to remain where they are. In terms of 2020 it's a big question mark. We don't see a major change in what is happening right now. I mean of course demand will be the important factor but the stock should remain low and we are not foreseeing an increase in refined metal production which implies that price should be pretty much around where they are today. I was in LME along with -- in this -- during this week and clearly there were different views about not only the zinc market but also the copper market. Part of the market was very pessimist and part positive. So there is a lack of right information or a level of uncertainty about what can happen. We are confident that our intelligence about the market is good. We have been right about what's going on in the last three to four years.
So I have no reason to believe that price should be mostly different from what we've seen in 2019. Of course if