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Smelters Don’t Expect Copper Concentrate Shortage In 2018
- Nov 18, 2017 -

Chinese smelters have confirmed that they do not expect a copper concentrate deficit next year, says Reuters.

Supply and demand for copper concentrate processed in China will be “basically balanced, with a slight surplus,” an official from the China Smelters Purchase Team (CSPT) said at an unscheduled meeting in Shanghai on Tuesday (November 14), adding that a deficit “does not exist.”

The CSPT, which sets benchmark treatment and refining charges (TC/RCs) for copper concentrate processed in China, reaffirmed its position in response to views expressed by miners at the recent London-based LME Week that there will be a shortage of concentrate next year.

Even without taking into account the impact of China’s environmental crackdown on smelters, “the market remains balanced,” the CSPT official said. The date of the group’s next meeting has not yet been fixed.

A shortage of concentrate would be bad news for smelters, as they have to compete for supplies by charging less to miners to process their raw material. Miners, smelters and traders often use a combination of the annual benchmark, quarterly benchmarks and spot prices when setting TC/RCs.

CSPT benchmark TC/RCs prices for the last quarter of the year were set at $95 per tonne and 9.5 cents per pound, above market expectations. In the spot market, fees charged this quarter have ranged from $80 to $90 per tonne and 8 to 9 cents a pound.

The annual benchmark is usually settled during Asia Copper Week, which this year will be held in Shanghai from November 28 to December 1. Members of the CSPT, which include Jiangxi Copper (HKEX:0358), Jinchuan Group (HKEX:2362) and Tongling Nonferrous Metals Group (SZSE:000630), are expected to discuss key contracts with global miners at the event.

Copper prices have increased more than 22 percent this year on the back of a strong demand from top-consumer China, offering miners good margins. But fears of a slowdown in the last quarter have put pressure on prices this week.

Data released yesterday shows that China’s economy growth missed expectations, as the government extended a crackdown on debt risks and pollution.

“There’s definitely a move out of riskier assets which typically has a negative impact on commodities but there are fundamental reasons why commodities are selling off. China is slowing and yesterday’s data exemplified it,” said Caroline Bain, senior commodities economist at Capital Economics.

On Wednesday (November 15), LME copper closed up 0.2 percent, at $6,733 per tonne, after touching a more than one-month low of $6,713 earlier in the day.