Copper TC/RCs down again in late Jan due to pre-holiday Chinese purchases, tighter outlook

Copper concentrate treatment and refining charges (TC/RCs) dropped further at the end of January, with smelters in China breaking away from the quarterly procurement price floor amid an outlook for a tightening in supply later this year.

Fastmarkets’ copper concentrate Asia-Pacific TC import index fell to $79 per tonne/7.9 cents per lb on Thursday January 31, the lowest since mid-June, when the index was recorded at $77 per tonne/7.7 cents per lb.

Purchasing interest is surprisingly high ahead of the Lunar New Year holiday in early February, with multiple parcels of copper concentrates sold to Chinese smelters for post-holiday production. 

Most parcels for Chinese buyers over the past two weeks were reported at a TC level ranging from the low-$80s to $90 per tonne, with both clean and complex qualities.

TCs for all transactions on a cif China basis captured by Fastmarkets were settled below the $92-per-tonne mark, a pricing floor for the first quarter set by the group of 10-largest Chinese copper smelters known as the Chinese Smelters Purchase Team.

Copper concentrate flows into China increased by 13.7% in 2018, with the country – which has the world’s largest copper smelting capacity – taking in 19.72 million tonnes of concentrates last year.

Meanwhile, traders are beginning to position themselves for the tighter conditions anticipated later in the year, with multi-month tenders being awarded at increasingly lower numbers.

Tender market picks up; multi-month contracts awarded
Several miners tendered copper concentrate parcels over the past couple of weeks, both for spot tonnages and for delivery toward the latter part of 2019.

Deals and offers for tonnes show that the market’s forward curve is in contango.

Miner to trader terms for February tonnages remain in the $70s/7-cent range, but when offered tonnage further out traders appear willing to pay terms in the $60s/6-cent range.

The lower TC/RCs committed reflect a turn in current merchant bullishness on the market in the second half of the year.

Sierra Gorda, a Chilean joint venture between Poland’s KGHM and Japanese companies Sumitomo Metal Mining and Sumitomo Corp, tendered 40,000 tonnes for April, June, September and December delivery in the low $60-per-tonne range; and a Yamana Gold Chapada tender of 20,000 tonnes for March and July delivery is expected to hit similar levels on a cif Asia basis.

Vedanta International’s Black Mountain offer for 5,000 tonnes of concentrates per quarter until the first quarter of 2020 was awarded in the mid-$60s per tonne.

DRC tonnages diversion in question
In Africa, more tonnages from the Democratic Republic of the Congo were said being stockpiled in the hopes that freshly imposed import tariffs by the government of neighboring Zambia would be softened.

Up to 80,000 tonnes of DRC concentrates originally slated for producers in Zambia were expected to be diverted to other destinations, with China said to be a preferred destination, one source said.    

“They’ll take it to China if it doesn’t work but it’s still worth selling to Zambia even if you pay … the tariffs, you make a few dollars,” a trader said.

A second trader suggested that some of the DRC concentrates would eventually make their way to Europe. 

Chuquicamata’s flash smelter to stay shut until end of March
In the short term, more tonnage is likely to flow into the Asian spot market with the flash smelter at Codelco’s Chuquicamata complex in Chile set to remain closed until at least the end of March – later than the initial plan of February.

The smelter, which can consume 100,000 tonnes of concentrates per month, has been offline since December while it awaits improvements to its environmental capture system.

“You get the impression things will drift out further,” one market source said.

Trafigura venture to build mega copper-zinc-lead complex
A joint venture between Trafigura and a Saudi Arabian company is slated to begin building a major copper, zinc and lead smelter complex in Saudi Arabia approximately one year from now, Fastmarkets previously learned. 

The designated capacity at the complex will be 400,000 tonnes per year of copper, 200,000 tpy of zinc and 55,000 tpy of lead, a company source said, adding that no timetable for commencement is currently available. 

The new smelter could bring a massive change in copper trade flow in the Middle East. 

Saudi Arabia is home to major copper mining assets, including the Jabal Sayid mine that is co-owned by Barrick and Ma’aden.

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