China smelter group agrees to lower Q1 copper charges
The charges tend to fall when ore supply declines and rise when more concentrate is available.
Copper miners and smelters are unlikely to settle the annual treatment and refining charges (TC/RCs) for 2024 this week, amid uncertainty about the market balance next year, sources said.
“There are mixed views regarding the supply and demand outlook for next year, which leads to a divergence between buyers and sellers. We are not looking to settle this week,” said a source at a major Chinese smelter.
Every year, global miners and Chinese smelters usually meet in Shanghai in November for the Asia Copper Week gathering to negotiate their copper concentrate contracts and settle TC/RCs level for the following year.
Miners pay TC/RCs to smelters to process copper concentrate into refined metal, offsetting the cost of the ore. TC/RCs fall when tight concentrate supplies undermine copper smelters’ profit margins.
A settlement this week looks unlikely, four sources with knowledge of the negotiations told Reuters, though it is not rare for negotiations to drag on when miners and smelters cannot agree to a number.
A Reuters poll of 12 industry sources last week showed a wide range of forecast for TC, from the $70s to $90 a metric ton. However, most participants saw TC/RCs at around or slightly lower than $88 agreed last year for 2023.
Chilean miner Antofagasta this week offered to pay Chinese smelters TCs of less than $75 a metric ton in 2024, some 15% below the agreement made around the same time last year, sources told Reuters.
The drop signalled the miner’s expectation of a supply deficit for 2024.
China’s biggest smelter Jiangxi Copper also expected a “tight balance” in the global concentrate market next year, followed by a deficit in the following two years, due to a surge in smelting capacity expansion.
Meanwhile, consultancy CRU expected a 260,000-ton surplus next year.
Adding to the complexity during the negotiations is a recent ore processing reduction at First Quantum Minerals’s Cobre Panama mine as protests against the project block port access.
The output loss at Cobre Panama so far is equivalent to 1,500 tons in copper metal content, said a source familiar with the matter.
“The next few days will be critical” in clearing the boats at port, as inventory is piling and sheds are being filled up, said the source.
Uncertainty around how much supply from Freeport-McMoRan’s Grasberg mine in Indonesia will be available from June next year after their export permits expire had also created some difficulty in forecasting the market balance.
(By Mai Nguyen, Siyi Liu and Julian Luk; Editing by Shailesh Kuber)
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