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 

What to read next
The German auto-manufacturer BMW opened its first press shop in North America at its plant in Spartanburg, South Carolina, where it will produce the exterior for its X3 model, the company announced on Friday June 21
China’s exports of refined copper rose to an eight-year high in May, with exports expected to stay elevated through June, sources told Fastmarkets in the week to Friday June 21
Saudi Arabia, through its spearheading of a mining and minerals production and consumption push in the Middle East, a region usually associated with oil and gas, is leading neighboring countries to increase their presence in the base metals markets
Indonesia is preparing to invest more in its aluminium supply chain as part of its wider critical metals strategy, Fastmarkets understands
Market sentiment remain mixed on whether the investigation will impact aluminium prices and production
Aluminium premiums in all key regions remained well-supported in the week to Tuesday June 18, amid ongoing reports of tight availability, while market participants in Europe and Asia are focusing on ongoing negotiations for Japanese third-quarter supplies