China’s biggest copper smelters have cut the price they will pay for domestic copper concentrates in 2014, after winning better terms for imported material.
Long-term contracts with domestic suppliers are settled according to a formula based on a percentage of the Shanghai Futures Exchange copper price, payable by metal content and adjusted for different grades.
This year, suppliers have agreed to a percentage of 83%, down from 87% last year, market sources told Metal Bulletin.
“Currently, copper concentrates is a buyers’ market. The supply surge has boosted [treatment and refining charges] TC/RCs for imported concentrates, and domestic prices have also become cheaper,” a source from one of China’s largest smelters told Metal Bulletin.
The formula assumes a standard grade of 20% copper content, with material above that level getting a premium and below that level a discount. The premiums and discounts for different grades are based on industry standards, and are not negotiated.
Chinese copper smelters won a 31% increase in TC/RCs for imported copper concentrates in 2014.
As with TC/RCs, a group of China’s major smelters will usually all agree to accept the same payables index.
A second smelter confirmed it has lowered the index to 83% as a result of rising supply.
“Our 2014 plan is to purchase 100,000 tonnes copper concentrates domestically, which is flat with last year,” he said. “Even though TC/RCs and the domestic payables index are more favourable to us, our profits will still be mostly affected by copper prices in 2014, as our group owns some mines.”
