Major copper miners and Chinese smelters have moved closer to agreement on treatment and refining charges (TC/RC) for 2022, two sources with knowledge of the talks said on Friday.
TC/RCs are paid by miners to smelters to process copper concentrate into refined metal. The first settlement between a major miner and a smelter in top copper consumer China in annual negotiations usually becomes the benchmark for the year ahead and has a large role in determining profitability.
The two sides are $8 a tonne apart on where they would like the treatment charge benchmark to be, with smelters seeking around $69 a tonne and miners $61, a mining source said.
That’s a narrowing of the gap from last month, when miners sought a rollover of this year’s benchmark agreed by Freeport-McMoran at $59.50 a tonne and smelters were aiming for $70, the source added.
Chile’s Antofagasta has also set the benchmark in recent years.
TC/RCs rise when more supply is available and smelters can demand better terms.
The second source, with a major smelter, said one of the miners was willing to settle in the low $60s and the other had a “very similar” position.
“We may be able to improve to $70 or very close to $70. Our numbers reflect the real market balance,” the smelter source said on condition of anonymity, cautioning that negotiations could still be difficult.
Analysts expect the tight copper mine supply that led to six straight drops in the TC/RC benchmark to ease in 2022, although the potential shutdown of Peru’s Las Bambas mine could change market balance projections.
“Most people agree – well, maybe not the miners – that the market will be softer next year. The increase in mine production will outpace smelter capacity,” said a trading source following the talks, who sees the two sides coming together in the mid-$60s.
(By Zandi Shabalala and Tom Daly; Editing by Barbara Lewis)
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