Copper concentrate TC/RCs hit 1-year high; Chuquicamata outage could herald long market [CORRECTED]

Copper concentrate treatment and refining charges (TC/RCs) rose to their highest in a year as the market gathered in London for LME Week.

The Fastmarkets copper concentrate TC/RC index came in at $89 per tonne / 8.9 cents per lb on Monday October 15, a gain of $2.60 / 0.26 cents week on week to the index’s highest level since October last year.

Spot copper concentrates trading has been limited, with the industry less active at the start of annual contract negotiations. But in recent deals, traders have been increasingly less inclined to bid aggressively on spot copper concentrate TC/RCs; the gap between where traders and smelters are purchasing tonnes also dropped, to $4.60 / 0.46 cents.

This comes as mining companies continue to release tonnes into the spot market after having held off selling earlier in the year, in the hope that smelter disruptions would fade and the market would once again become more competitive.

The switch from a contango forward price spread to q backwardation has also lessened trader appetite, leaving no potential to gain from pricing between M+1 and M+4 quotational periods (QPs).

The November to January spread was seen in a $10-per-tonne backwardation as of the LME’s 5pm close on October 15.

“The killer is when you are taking concentrates into blending, because you don’t have a receiver and an outbound QP,” one trader said. “It’s a no go in a backwardated market.”

Smelter disruptions continue with Chuquicamata outage
Disruptions at major smelters have led to a 32.8% rise in TC/RCs since the end of March, and woes for market longs look set to continue with Codelco’s Chuquicamata smelter set to be out of the market for a matter of months.

The smelter at Chuquicamata is currently operating at a reduced 1,800 tonnes per day (below its 2,400 tpd capacity) until November, and will close for maintenance in December to allow it time to comply with higher environmental requirements.

“Certain processes may be delayed by approximately 80 days, coinciding with scheduled maintenance for 2019,” Codelco said.

Chuquicamata produced 330,900 tonnes of copper in 2017, out of Codelco’s 1.734 million tonnes total output.

The closure of the smelter could mean some 200,000-300,000 tonnes of concentrates will have to find a new home during the suspension.

“It caught a lot of people off guard, it depends on how long people are already,” a second trader said.

Meanwhile, the tribunal deciding the fate of Sterlite’s Tuticorin smelter have had their deadline for a vote extended until November 30, which is likely to cast a shadow over annual contract benchmark discussions.

“It’s still unclear where the benchmark will settle,” a third trader said in the aftermath of LME Week.

China’s concentrate imports up; new smelting capacity comes online
Despite this year’s series of supply disruptions, global copper smelting capacity continues to grow through new smelter builds in China.

China’s imports of copper ores and concentrates for the first nine months of 2018 soared year on year, thanks to new demand arising from smelting capacity expansion. Total imports for the January-September period stood at 14.991 million tonnes, up 19.5% versus the prior year, customs data showed.

The September imports surged by 31.3% against the same month in 2017, to 1.93 million tonnes.

“Many Chinese smelters’ expansion plans this year have been delayed, but the new capacities are on the way; they will be there in the near future,” a fourth concentrates trader said.

At the beginning of September, the long-awaited 400,000-tonne-per-year Ningde copper smelter started to produce after several postponements of the project, which is jointly owned by Chinalco and Fujian government.

Although the smelter is said to be mainly processing feed from Chinalco’s Toromocho mine for the first phase, its sister company Yunnan Copper’s concentrates purchasing team is currently searching for tonnages to feed the world’s 14th largest copper smelter, Fastmarkets has learned.

Also in early September, Western Mining’s new smelter in Qinghai province commenced production, according to the company. The project can produce 100,000 tonnes of anodes every year.

[This article was first published on October 15, and was updated to correct China’s copper ore and concentrate imports figure for January-September.]

What to read next
Fastmarkets proposes to amend the name of the MB-AL-0231 Aluminium P1020A all-in price, delivered Midwest US, US cents/lb to clarify that the price is based on the London Metal Exchange cash aluminium price.
Read more from senior analyst Andy Farida on how the price action in LME nickel has played out in the first half of 2024
Tight aluminium scrap availability, the increase in container costs, sluggish demand in the US and the US market’s current indifference to rising premiums in Europe and Asia were the top subjects discussed during the Harbor Aluminum Summit that took place in Chicago on June 4-6
Germany-based copper recycling and non-ferrous metal provider Aurubis has started commissioning their secondary smelter in Augusta, Georgia, and could eventually introduce black mass recycling to the facility
Base metals on the London Metal Exchange were mixed in morning trading on Monday June 10, with three-month prices lacking direction amid thin traded volumes due a public holiday in China, the largest market for base metals
Copper concentrate treatment and refining charges have repeatedly fallen to record-low levels over the first five months of 2024