The Metal Bulletin Copper Concentrates Index was calculated at $100.7 per dry metric tonne/10.07 cents per lb on Friday October 14, compared with $100.9/10.09 at the end of September.
Key points:
- Mine tenders in $90s; smelter market in low $100s
- Q4 supply in focus after Chile output drops
- Long-term tenders attract keen trade interest
While smelter sales slowed considerably, there was still some activity in the mine-to-trader market, with a sale of high-grade Chilean concentrates said by traders to have concluded in the high $90s/9s, while two parcels of Escondida were said to have been tendered in the mid $90s/9s.
One clean concentrate deal concluded by the trading arm of one Chinese smelter at $105/10.5 cents, smelter sources in China said.
“The spot market is extremely quiet due to the disruption of the Golden Week in China. CSPT members will try to hold their $105 floor level but other smaller ones might be able to accept lower numbers with financing terms,” a second smelter source said.
“It’s the traditional ‘cold war’ time. Everyone is trying to move the market in their favour, and buying will continue to slow before LME Week,” another Chinese smelter source told Metal Bulletin.
While the spot market initially looked poised to tighten after news of strike action at the Grasberg mine in Indonesia, bullish sentiment faded quickly as the disruption ended in early October.
Attention subsequently turned to the likely impact of seasonal mine destocking, which typically contributes to a rise in TC/RCs through to the end of the year.
This year, the effect may be less pronounced as miners have been under ongoing pressure to release inventories, some sources said.
“I’ve been basically square or a little bit short throughout the whole year. If I asked my board if I could keep two parcels in port, they’d kill me,” one copper miner said.
However, the same balance-sheet pressures will also compel board execs to push mine managers to maximise output in the run-up to the end of the year, others said.
“They might think they’re square now, but they might find a few extra parcels coming out between now and the new year,” a smelter source said.
But, despite the best efforts of mine managers, there was further evidence this week that Chilean production is falling short of expectations, and this could also limit the impact of any seasonal destocking, sources said.
After a 4.1% drop in production in August, Chile is on course to produce about 5.48 million tonnes of copper this year, down from 5.76 million tonnes in 2015 and below expectations that Chilean output will remain flat.
The drop has been largely attributed to a drop in output at Escondida, although one mining source active in the country said the size of the shortfall indicated that other mines are also facing production issues.
“Even after you account for Escondida, the Cochilco numbers are about 150,000 tonnes short of what I was expecting for the year,” the mining source said.
Some sources raised questions about supply from Antofagasta’s Centinela project following maintenance on the SAG mill, but a source familiar with the matter told Metal Bulletin the equipment is back in service.
“Centinela was on scheduled SAG maintenance which lasted some more time to solve other issues that appeared at the last minute. The mill has restarted and is now working OK,” the source said.
Despite supply concerns in Chile, Peruvian production is continuing to beat expectations, with Macquarie analysts noting that a “stellar month” in August puts the country on track to produce 2.37 million tonnes this year.
During the slower conditions, traders were free to focus on submitting proposals in long-term tenders stretching out several years.
NewGold was said to have sold about 60,000 dry metric tonnes of concentrates from the New Afton mine over 2017 to 2019 at about $5/5 above future annual benchmarks.
EMR Capital and Lighthouse Minerals were also said to be tendering concentrates from the Capricorn mine in north-west Queensland, which was formerly known as Mount Gordon, which is set to enter production in mid-2017.
Trade sources said the partners are tendering one parcel shipping in the fourth quarter of 2017, and 50,000 dmt per year over 2018 to 2020. The tender was still open at the time of publication.
The largest tender was one held by Audley Capital, which acquired majority stakes in the Mantos Blancos and Mantoverde mines from Anglo American last year in a deal worth $300 million in cash and up to $200 million in additional future payments linked to copper prices and the development of the assets.
Audley Capital has approached traders looking for $100 million in finance to develop Mantos Blancos between 2018 and 2025, in return for an offtake of 90-100,000 dmtpy in the first three years, and 150,000 dmtpy in the remaining years.
Audley Capital declined to comment on the tender, which also remained open at the time of publication.
