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The week looks set to be interesting, with copper concentrate treatment and refinement charges (TC/RCs) at record lows, and London Metal Exchange (LME) copper prices at multi-year highs.
Fastmarkets presents five key talking points that are likely to dominate conversations during the event.
Spot copper concentrate TC/RCs are at fresh record lows, since starting to collapse in the fourth quarter of 2023.
Fastmarkets’ copper concentrates TC index, cif Asia Pacific was calculated at $2.30 per tonne on April 5, down by 97.4% from $87.70 per tonne on September 29, 2023.
The latest calculation is the index’s lowest ever. Fastmarkets carries historical pricing data for the market as far back as June 2013.
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TC/RCs are discounts to LME copper prices, and typically fall when the supply of copper concentrate is tight.
The collapse in TC/RCs was in part led by the shutting of First Quantum’s Cobre Panama mine and exacerbated by other copper miners downgrading production guidance at their operations.
Discussion about the outlook for spot TC/RCs has not stopped since their dramatic collapse began, with some participants saying the market is already at a bottom, others expecting the decline to continue and others refusing to comment because they cannot see where the market is going, Fastmarkets heard.
At the same time, some participants do not see the market remaining in its current state much longer.
“This is a historical moment, and historical moments don’t last long,” a trader told Fastmarkets.
“Spot liquidity is slowing down now, [and] it’s getting harder to ink deals at single digits,” a second trader said.
Others, however, noted that the market tightness is undeniable and that structural changes need to take place to reverse the low TCs.
“The supply deficit structure remains intact, [and] this will leave spot TC/RCs at lows, or cap the room to rebound,” a miner source said.
Multiple sources have told Fastmarkets that a good amount of spot copper concentrate was sold to smelters at a fixed TC number of or close to $10 per tonne or pegged to Fastmarkets’ index for the remainder of the year, reflecting supply tightness.
Annual copper concentrate negotiations typically kick off when miners and smelters meet in Shanghai each November, and while it is too early to make a reasonable prediction for 2025 terms, the tumbling spot TC/RCs and marked tightness being seen at the moment will no doubt raise some curiosity among CESCO Week attendees about how annual talks might progress later in the year.
“We will meet the world’s main copper smelters next week. It’s too early to start next year’s supply talks, but [we] will exchange ideas on market dynamics,” a second miner source said.
“The market can’t neglect the fundamental reason behind the tumble [in spot TCs]; it’s tighter supply [of global copper concentrate] and this will not change next year, but it is also clear that no smelters can afford to run furnaces at the current spot [copper concentrate] terms,” a third trader said, adding that contract talks should prove difficult when they take place later in the year.
The 2024 copper concentrate TC/RC benchmark was agreed at $80 per tonne/8.0 cents per lb between major global miners and copper smelters, firstly settled between Chilean miner Antofagasta and China’s Jinchuan Group in November 2023.
This is well above the smelter’s purchasing level of the low-to-mid single-digit numbers currently being seen in the spot copper concentrate market.
Tighter-than-expected supply of copper concentrate has posed significant challenges for Chinese copper smelters looking to bring new projects online, with many of them already struggling to secure sufficient spot feedstock for their current production needs, sources have told Fastmarkets.
“Many are now questioning if China’s new copper smelting pipelines will be carried out as scheduled, and I heard some smelters that haven’t started construction are considering dropping their new project plans. It’s good time now [for smelters] to rethink their plans before taking any real action,” a smelter source said.
More restrictive policies on new copper projects are also expected to be introduced by the Chinese government due to overcapacity and fiercer competition in securing copper concentrates, several sources told Fastmarkets during a smelter meeting in March.
Despite the lingering questions over the ramp-up of Chinese smelting capacity, a number of sources have told Fastmarkets that there are still several factors at play that has led them to believe the tightened market conditions will worsen rather than improve in the second half of the year and beyond.
Sources highlighted the opening of Adani’s smelter in India in the second half of the year along with new smelter capacity in Indonesia taking Freeport-McMoRan’s Grasberg concentrates out of the international market as tightening concentrate supply even more.
The Adani smelter will have an initial capacity of 500,000 tonnes per year, before ramping up to 1 million tonnes per year in the coming years.
“Adani will be a big, big factor,” a third miner source said.
Traders said that they hoped to use CESCO Week as an opportunity to assess the potential effects of the ramp-up of Adani’s smelter on the market.
It has long been known that the Grasberg mine will stop exporting its concentrate into the global market, but now that the moment is drawing closer, sources have told Fastmarkets the market it is finally having to come to terms with the change.
“We are getting closer and closer to Grasberg not exporting,” a fourth trader source said, adding this was heightening concerns about supply tightness.
Sources did note additional mine supply coming online in the second half of the year and heading into 2025 in the form of Teck’s continued ramp-up of Quebrada Blanca 2 in Chile and new projects like ERO’s Brazilian mine Tucumã. But these sources added that the new concentrate supply will not be enough to completely reverse market tightness, with the market so acutely tight at the moment.
Sources also expressed a desire for greater clarity on concentrate production, particularly for the second half of 2024, due to the uncertainty surrounding output from certain mines.
“There is uncertainty about production from some mines in the second half of the year,” the third miner source told Fastmarkets.
“More mine supply is on the way – on paper. More smelting capacity too. And smelting capacity already in place is underutilized. Copper concentrates are in short supply. The rate of change in copper consumption is outpacing the rate of change in raw materials supply. That’s the key imbalance in today’s copper market,” Duncan Hobbs, head of research at Concord Resources, said.
Ultimately some sources expect the market imbalance to continue to challenge smelters.
“We will need to see some adjustments on the smelter side,” a fourth miner source told Fastmarkets.
“Deficit markets can’t exist; you can’t have a negative amount of stocks, so some smelters will have to close, or reduce production,” the fourth miner source added.
Another key talking point at CESCO Week will likely be the currently very high LME copper price; the copper price hit $9,590.50 per tonne on Friday April 12, the highest level since June 10, 2022, when the red metal reached $9,622.50 per tonne.
The high LME price is seen as largely tied to the current concentrate tightness. But other factors are also pushing up the LME copper price, including expectations for improved macro-economic conditions in the second half of the year.
“Copper prices were supported by expectations of reduced refined output, with the market anticipating production cuts by China’s leading smelters in response to concentrate TC/RCs approaching zero,” Fastmarkets analyst Boris Mikanikrezai said.
Positivity surrounding China’s macro-economic situation has also provided support to red metal prices.
“Chinese stimulus and the mere fact that things have stabilized in China, amid the improved manufacturing data, suggests stimulus that has been implemented is beginning to form green shoots,” Fastmarkets analyst Andy Farida said.
“All of the current macro-economic data is pointing to a stronger-than-expected economic activity despite the backdrop of geopolitical uncertainty elsewhere,” Farida added.
Concorde Resources’ Hobbs said that Chinese demand from “new productive forces” looks promising, the ex-China industrial cycle is turning up and concentrates are in short supply.
But others saw reasons to believe high prices may not be supported by Chinese demand.
“At some point, funds will also have to face the fact that base metals fundamentals are not necessarily validating the huge price surge that they have single-handedly engineered,” Ed Meir, analyst at Marex, said.
“This is best evidenced by the fact that we see record contangos in a number of metals, soft premiums (especially in copper), fairly comfortable inventories and a Chinese recovery that seems tentative at best or nonexistent at worst,” Meir added.
Chinese copper demand accounts for well over half of global copper consumption, representing 58% of expected demand in 2024, according to Fastmarkets and International Copper Study Group data.
Chinese demand has recovered more slowly than expected since the end of the Zero-Covid policy, Fastmarkets has been told by a number of participants.
Whatever it ends up looking like, Chinese demand will be a major factor in the coming months and a key talking point at CESCO Week.