Copper processing fees for the Chinese market expected to increase in 2023

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The TC/RC benchmark, referenced in supply contracts globally, is typically taken from the first settlement between a major miner and a major copper consumer smelter in China in annual negotiations.

“2023 is undeniably shaping up to be a solid year for concentrates growth. Additionally, it comes at a time when capacity additions from Chinese foundries are limited,” said Colin Hamilton, Managing Director of BMO Capital Markets.

“This raises the specter of a smelter bottleneck for the first time in over a decade, where smelter utilization is at maximum, forcing excess concentrate to be stored or forced offline via economy,” he added.

BMO forecast the 2023 benchmark at $85 per tonne and 8.5 cents per pound, trending higher.

This year the benchmark has been set at $65 a ton and 6.5 cents a pound, but China’s major copper smelters have already raised their TC/RC floor in the fourth quarter to a five-year high at $93/9 .3 cents due to a glut of supply.

“Buyers will have the upper hand in the negotiation,” said a source at the Chinese smelter, who sees TC jumping to $100 a tonne.

Chart: Copper Concentrate Processing Charges Copper Concentrate Stocks in Major Chinese Ports

Three sources in China saw the 2023 TC set at $80-90 per ton, and another Chinese smelter source saw the TC rise above $100 per ton.

Miners pay TC/RC to smelters to turn copper concentrate into refined metal, offsetting the cost of the ore. TC/RC increases when supply is greater and smelters can demand better terms on raw materials.

Globally, the 2023 concentrates market is also seen in surplus, said Nick Pickens, research director at consultancy Wood Mackenzie.

Pickens forecasts benchmark TC/RC to be 20% to 30% higher than 2022, around $78/7.8c to $84.5/8.45c.

Market participants pointed to Teck Resources’ Quebrada Blanca Phase 2 project in Chile and Anglo American PLC’s Quellaveco project in Peru which would help boost concentrate supply.

Meanwhile, the Chilean Codelco has announced that it will extend maintenance work at its Chuquicamata smelter to 135 days, compared to 90 days initially.

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However, China’s easing of COVID-19 restrictions is working in favor of miners, which could lead to increased demand for refined copper and smelters consuming more raw materials.

“We have the new Daye smelter starting very well and the existing Chinese smelters are operating at very high capacity to satisfy the domestic market, which looks promising after the Chinese government’s recent (easing) announcements,” a source said. in a minor.

Daye Non-ferrous Metals’ 400,000-tonne-per-year refined copper smelter in Hongsheng began trial commissioning from Oct. 23, sources said.

Chart: China Refined Copper Production

“We cannot deny that the market will be more favorable to foundries in 2023 than in 2022 and therefore it is reasonable to expect that annual TC/RCs will experience a moderate increase in annual trading at the level of the 70s” , added the miner.

After years of meeting online due to COVID, some Chinese smelters will meet with miners in person in Singapore to discuss TC/RC regulations, sources said.

Chart: Chinese imports of copper ore and concentrate

(Reporting by Mai Nguyen in Hanoi and Siyi Liu in Beijing; Editing by Simon Cameron-Moore)

By Siyi Liu and Mai Nguyen

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