Japanese smelters held talks with an Australian miner early this week but did not reach an agreement, they added. TCs are paid by miners to smelters to process their concentrates into refined metal.

The American Zinc Association meeting closed this week and at least one deal was thought to have been struck for 1999 zinc TCs. Japanese trade sources said the deal, understood here to have been made by a South Korean smelter, was believed to have set TCs at $167 a tonne based on a London Metal Exchange (LME) zinc price of $1,000.

"TCs at $167 are good for miners," said a source at a Japanese smelter. "We'll have to take this figure into account but we believe the miners are looking for are too low, so it will probably take some time to reach an agreement."

Another trader said, however, that TCs at $167 were not so bad forJapanese smelters in light of the yen's current weakness against the dollar. In 1998, the benchmark TC was settled at about $185-$187.50 per tonne, based on an LME cash price of $1,100 tonnes. Macquarie Equities Ltd said in a report that was equivalent to $172.5 based on a price of $1,000/tonne.

Traders said Japanese zinc imports under the duty-free General System of Preferences (GSP) programme are expected to fall sharply this year because of weak domestic demand and cuts in Japan's tariffs on base metals.

"While some speculate imports under the GSP are likely to total 40,000 tonnes or so, it is not known how much zinc will be imported under the system this April," said one trader. "I believe the volume will decline sharply from last year's level as the advantages of the tariff exemption have diminished."

The GSP scheme grants a tariff exemption to a certain amount of imports from designated developing countries each fiscal year. In 1998-99, Japan's GSP zinc imports totalled 66,572 tonnes.

Japanlowered the import tariff on zinc on January 1 to 4,300 yen per tonne from 5,040 yen last year. In addition, domestic demand for galvanised steel from the construction and automobile sectors remains slow due to Japan's protracted recession, traders said.

In calendar year 1998, Japan's zinc imports totalled 1,13,367 tonnes, including imports under the GSP system, official data showed. Exports soared to 46,681 tonnes from 22,905 tonnes in 1997, as smelters sought to make up for a decline in domestic consumption. Exports in 1999 are expected to fall, however, in line with the expected decline in metal imports.

Zinc prices may have a little more room to fall, according to some analysts attending the annual American Zinc Association meeting in California, while others are predicting some recovery with prices staying within current ranges to slightly higher.

CRU International analyst Geoff Mason forecast weaker zinc price outlook, dropping to around $900 a tonne (41 cents a lb) by the end of 1999 withquarterly averages as low as $950 a tonne (43 cents a lb).

"Although events of recent weeks point to a continuing reduction in stocks and rise in price, we believe there is a real danger that a surplus will be reasserted later this year, forcing prices down to even lower levels until significant closures of high cost operations are made. On the long-term, we shouldn't assume that the bottom has been reached," said Mason.

On the flip side, Brook Hunt managing director Huw Roberts painted a slightly different picture, forecasting an average 1999 zinc price of $1,100 a tonne (50 cents a lb).

"Brook Hunt believes the zinc price should be going up," said Roberts. One major zinc producer was more inclined to agree with Roberts view, based on the fundamentals showing a balanced market.

"If the market stays like it is, the price should be at this level or a bit above which is in the high 40 cent level which is more of a reflection of the market as we see it," said David Thompson, president and chiefexecutive officer of Cominco Ltd.

Metal Bulletin Research is forecasting a spot price to average $1,025 per tonne (46.5 cents a lb), according to its February report. In its latest industry report, Standard Bank forecast an average annual price of $1,075 a tonne (49 cents a lb) for 1999.

The London Metal Exchange cash settlement price Wednesday was $1,054.50 a tonne (48 cents a lb) and LME stocks stood at 310,250 tonnes, down 825 tonnes, hovering around the lows last seen in 1992.