Chinese smelters cut purchases of copper concentrate in 2019

Spot treatment and refining charges for imported copper concentrates for Chinese smelters stood at $90-$94/mt and 9-9.4 cents/lb in the week to November 24, unchanged from the week before, prompting some smelters to cut concentrate purchase volumes for 2019 as current spot fees are higher than 2019 term fees, Chinese industry sources said Monday.

Jiangxi Copper Corp in a weekly report said some smelters in China were opting to cut 2019 term concentrate purchase volumes, or delay inking term concentrate deals, as they could still get spot fees of over $90/mt and 9 cents/lb, which was higher than the 2019 term TC/RC benchmark.
Annual term TC/RCs have dipped for a fourth consecutive year, with Jiangxi Copper and Chilean miner Antofagasta inking the term fee for 2019 at $80.80/mt and 8.08 cents/lb, lower than 2018 rates of $82.25/mt and 8.225 cents/lb, according to Jiangxi Copper.

In 2014 and 2015, term fees were much higher at $97.35/mt and 9.735 cents/lb, and $107/mt and 10.7 cents/lb, respectively, S&P Global Platts reported earlier.

TC/RCs are the fees smelters charge miners for processing concentrates.

Shanghai-based Chinese brokerage Everbright Futures in its latest copper report said most smelters in China were unhappy with the 2019 annual term fee as $85/mt and 8.5 cents/lb was lowest they had wanted to accept.

It noted the 2019 term fee was $10/mt and 1 cent/lb less than the spot fee, as market players forecast copper smelting capacity growth in China to exceed that of its mined copper sector, resulting in a poorer 2019 term fee outcome.

Tongling Nonferrous Metals in its November copper report forecast spot concentrate supply to remain sufficient into Q1, citing a possible concentrate deal for a batch of clean ores with TC/RC offers of around $94/mt and 9.4 cents/lb for January shipment.

Jiangxi Copper similarly forecast China's Q4 copper concentrate supply to remain ample, keeping spot fees at high levels until at least year end.

China is forecast to add 780,000 mt/year of new copper smelting capacity in 2019 and 600,000 mt/year in 2020, Jiangxi Copper said, noting that market players were concerned with a possible conflict in future domestic copper smelting growth and concentrate demand.

China's mined copper output growth is lagging behind its smelting sector, with concentrate demand poised to exceed supply, according to Chinese industry sources.

China imported 1.57 million mt of copper ore and concentrate in October, down from 1.93 million mt in September, while imports over January-October totaled 16.558 million mt, up 19% year on year, latest General Administration of Customs data showed.