COMMENT: Ten things Metal Bulletin knows about copper concs and TC/RCs

Ahead of the LME Week, market participants gathered for the 1st Metal Bulletin Copper Concentrates Conference in London from October 3-4. Here are the ten things we learned.

Ahead of the LME Week, market participants gathered for the 1st Metal Bulletin Copper Concentrates Conference in London from October 3-4. Here are the ten things we learned.

1. Codelco will consider investing in additional smelting and refining capacity if TC/RCs move too far out of its favour, commercial senior vp Rodrigo Toro told delegates. The company will make $25 billion in mine-side investments to replace aging output over the next ten years but may also consider investing in new smelting capacity if its concentrates customers become too aggressive on TC/RCs, he said.

2. They may be cheap by miners’ standards but the cost of building new smelters in China is rising, according to Robin Bhar of Société Générale. Smelter capex costs in China have more than doubled from 2011 to $2,390-2,750 per tonne of capacity in 2012.

3. Concentrate grades are falling but that isn’t necessarily a bad thing. A smelter producing a tonne of metal from a 25% concentrate will get paid four times on the TC/RC, compared with three times using a 33% concentrate. Impurities in lower-grade feeds can increase processing costs but those can often be recouped in additional sales of acid and other by-products. That’s the miners’ position on the subject, at least.

4. Miners and smelters are shying away from public discussion of TC/RCs at this early stage in the mating season. Freeport McMoRan has visited customers in Japan but only for a traditional round of golf ahead of the start of serious discussions in LME Week.

5. Analysts are happy to talk terms. Citi, Macquarie, Wood Mackenzie and Société Générale see 2014 benchmark settlement between $80-90 per dmt and 8-9 cents per lb.

6. Analysts expect the copper market to move in to a surplus in 2013 and the copper price to fall the next year. Goldman Sachs expects copper prices will average $6,600 per tonne over the next 12 months while Barclays expects 2014 averages at $6,400 per tonne.

7. China’s Minmetals confirmed it has started first round of bid talks for Glencore Xstrata’s $5.9-billion Las Bambas copper mine in Peru.

8. Copper miners are having to “cherry pick” projects they will develop and slash capex as shareholders demand returns in a low-price environment, according to Barclays’ Gayle Berry. She sees a 56% fall in capital expenditure on copper projects over the next three years, which could severely restrict any growth in the world’s copper supply.

9. Brazilian copper producer Paranapanema plans to expand its cathode capacity to 320,000 tpy by 2016, from the current 280,000 tpy while Mongolia’s Erdenet Mining is looking to build a 100,000-tpy copper smelter.

10. Indonesia’s looming minerals export ban in 2014 remains a big cause on concern for copper, but more so for nickel.

Mark Burton
Twitter: @mburtonmb

Shivani Singh
Twitter: @ShivaniSingh_MB

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