October 17, 2019 / 5:39 AM / a month ago

UPDATE 2-China copper smelters hike Q4 treatment charge floor ahead of 2020 talks

* Smelting closure, more Indonesian supply push up floor price

* Q4 floor TC/RC sets the tone for 2020 benchmark talks in Nov

* CSPT to add 2 new members with combined capacity of 450,000T (Adds detail, quotes)

By Tom Daly and Mai Nguyen

KUNMING, China/SINGAPORE, Oct 17 (Reuters) - China’s top copper smelters on Thursday raised their fourth-quarter floor treatment and refining charges (TC/RCs) by 20% from the previous quarter, according to three people with knowledge of the matter.

The China Smelters Purchase Team (CSPT) set the treatment charge floor at $66 per tonne, and the refining charge floor at 6.6 cents a pound at a meeting in Shanghai, said the sources, who asked not to be identified due to the sensitivity of the matter.

That was up from $55 a tonne and 5.5 cents a pound in the third quarter, but still below the $90 a tonne and 9 cents a pound set for the fourth quarter of last year.

“Easing (restrictions) from an Indonesian miner ...and compounding smelters’ closures and maintenance in October both contribute to spot TC’s hike, then a CSPT floor price hike, and hopefully a benchmark hike next year,” said a trader with a private smelter.

Last month, Indonesia authorities approved an increase in copper concentrate exports for a unit of Freeport McMoran Inc , while research house Antaike said there were plans for some smelting overhauls in October.

Copper miners pay TC/RCs to smelters to process their ore into refined metal. Higher charges indicate more abundant concentrate supply or that smelters have less need.

The floor price agreed on Thursday also serves as an indication of the position that smelters in China, the world’s top copper consumer, will take in negotiations on a TC/RC benchmark for 2020, used for longer-term deals.

The benchmark is usually determined at a major November copper gathering in Shanghai.

Even as spot TC/RCs usually hike in the fourth quarter, a source at a large mining firm said he saw no fundamentals-based rationale behind the move, given recent supply disruptions and a decline in spot TC/RCs AM-CN-CUCONC this year.

“I don’t think they can buy a lot of tonnes of clean concentrate at that spot number,” the source said, noting a supply disruption at the giant Las Bambas mine in Peru.

Smelter expansions in China, including Zijin Mining’s recent launch of a 150,000 tonnes per year plant in the northeastern city of Qiqihar, has also added to competition for concentrate.

Spot TC/RCs bottomed at a near seven-year low of $55.50 earlier this month before edging up to $56.50 a tonne, having fallen around 38% this year, squeezing smelters’ margins.

CSPT members are supposed to adhere to the floor charges in any spot processing deals.

Huludao Dongfang Copper Industry Co Ltd, part-owned by Metallurgical Corp of China, and Zhejiang Jiangtong Fuye Heding Copper Co Ltd, a joint venture of CSPT member Jiangxi Copper, are joining the CSPT, three smelter sources said, which would increase the group’s membership to 12.

It was not immediately clear when the two firms, accounting for some 450,000-tonne annual capacity combined, would officially become members. (Reporting by Tom Daly in Kunming, China and Mai Nguyen in Singapore; Additional reporting by Melanie Burton in Melbourne; editing by Richard Pullin and Jason Neely)

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