PT Smelting declares force majeure on Gresik copper concentrate supply over extended plant outage

PT Smelting has declared force majeure and canceled copper concentrate supply shipments to its Gresik smelter in Indonesia, co-owner Mitsubishi Materials Corp told Fastmarkets on Wednesday November 28.

Scheduled maintenance at 300,000 tonne per year refined copper smelter Gresik has been extended by a month due to a delay in shutting down the oxygen plant there, which is run by a third party.

“While the maintenance shutdown of Gresik Smelter was planned to be finished off by the end of November, we expect PT Smelting will resume partial operation of Gresik Smelter in the mid-December,” Mitsubishi Materials Corp spokesperson H Shimizu said in an emailed statement.

PT Smelting, which is 25%-owned by Freeport-McMoRan subsidiary PT Freeport Indonesia, 60.5% by Mitsubishi Materials and the rest by a Japanese consortium, has already declared force majeure to Gresik’s copper concentrates suppliers, Shimizu added.

A second company source added that certain concentrates feed has already been diverted into the spot market as a result.

The shutdown could lead to a further increase in traded treatment and refining charges (TC/RCs) for copper concentrates already raised by closures or poor performance at other smelters.

Fastmarkets’ copper concentrates index stands at $86.80 per tonne / 8.68 cents per lb as of November 15. The index, which tracks the spot market midpoint, has climbed by 31.5% since April when Sterlite’s Tuticorin, another major smelter in Asia, was closed by the local government.

At last assessment, smelters were purchasing copper concentrates with TC/RCs at levels of $95/9.5 cents. TC/RCs are discounts to the copper price paid to smelters for the costs of processing concentrates into refined metal.

Grasberg tonnes diverted to spot
Gresik processes over 1 million tonnes per year of copper concentrates, predominantly supplied by Freeport’s Grasberg copper-gold mine in Papua. Several smelters in China reported offers of Grasberg concentrates at three-digit TC/RCs.

Some Grasberg parcels are known to be already on their way to the port of Nanjing, China, which is used by major smelters including Tongling, Jiangxi Copper, Jinlong and Daye Nonferrous, vessel tracking data shows.

The Grasberg parcels offered, of 20-60g gold content per tonne, requires a recovery rate of 96-97%, a China Smelters Purchase Team (CSPT) smelter source said.

For diverted parcels, Chinese smelters typically ask for a lower gold payable such as 95%, another miner source said.

Lower annual contracts
The outage at Gresik and subsequent higher TC/RC terms offered in the spot market comes after annual copper concentrates were sealed at lower levels.

Chilean copper miner Antofagasta and Chinese smelter Jiangxi Copper agreed 2019 supply at $80.80 per tonne/8.08 cents per lb on Thursday November 15, 1.8% lower than the 2018 number.

Aurubis, Europe’s largest smelter, has come out publicly to question if the number will be followed as a benchmark.

“We have a huge amount of disruptions next year so we just don’t understand the settlement and don’t understand the underlying reasons behind it,” Aurubis senior vice president of commercial Christophe Koenig said last week.

Still, Fastmarkets understands major miners including Freeport-McMoRan, CSPT smelters in China and Japanese smelters will follow the Antofagasta-Jiangxi number.

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