Sterlite outage drives copper TC/RCs to 3.5-month high, market eyes smelter expansions

Spot market copper concentrate treatment and refining charges (TC/RCs) rose to 3.5-month highs in mid-May, with the market becoming progressively bearish due to the continued outage at Sterlite Copper’s Tuticorin smelter in India.

Metal Bulletin’s copper concentrates TC/RC index rose by $2.4/0.24 cents over the past two weeks to $70.5/7.05 cents, its highest since the end of January

Terms for spot concentrates continued to weaken in light of the absence of Sterlite’s Tuticorin from the market as it contests an enforced shutdown – a court in Tamil Nadu state heard opening arguments from the company on Friday May 4, but then deferred proceedings until May 18.

“Normally, these cases take time,” a market source told Metal Bulletin. “There could be one or two more hearings before there is a resolution.”

A second source added: “What happens with Sterlite could change the picture of the whole market.”

The majority of spot deals made by smelters were reported to Metal Bulletin around the $76/7.6 per tonne mark but one 10,000 tonne clip was logged at $80/8 cents cif China with payment terms set at four months after the month of arrival (M+4).

Smelters in and outside China are looking to drive up terms even closer to the $82.25/8.225 cents benchmark set for annual contracts.

“This week we started to receive third-quarter offers from traders at current market levels, which is a new trend. It shows the market is realizing supply is not as tight as first expected,” a Chinese smelting source said.

Demand is also likely to be affected by the forthcoming 35-day shutdown at Birla’s Dahej smelter in Gujarat state, India, and Glencore’s Pasar smelter in the Philippines is still not producing at capacity, several sources said.

Some market players forecast that the eventual return to full-tilt production at these smelters will bring about enough demand for copper concentrates to bring down terms.

The market is also eyeing smelter expansions in China, some of which will be starting trial production in the third quarter of 2018.

In Chile, third-quarter deals for tendered Escondida tonnages were reported to Metal Bulletin by buyers at $65/6.5 cents, while fourth-quarter tonnes for the same mine were said to have traded below $60/6 cents.

Higher terms for tendered concentrates signal lower expectations of a large-scale deficit among traders. Bids for third- and fourth-quarter delivery cargoes were consistently in the mid-to-low $50s/5 cents region in February and March.

“The trading community has backed off a little bit – some of them got burned already from what they bought in the fourth quarter,” a mining source said.

Chilean miner Antofagasta reported that it expected second quarter sales to be down by 10,000 tonnes of copper contained – roughly 30,000 tonnes of concentrates – due to the failure of a pipeline connecting its Los Pelambres mine and concentrator to the nearby Los Vilos port

Meanwhile, data released this month by the Chilean copper commission Cochilco shows that the country’s mined copper production in March was up by 30.7%, or 114,800 tonnes, compared with the same month last year.

In 2017, mine production was adversely affected by strikes at Escondida, the world’s largest copper mine, and discussions with unions over a multi-year labor agreement are set to restart on June 4.

Additional reporting by Gladdy Chu in Shanghai and Julian Luk in Hong Kong

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