Platts updates specifications for copper cathode assessments in China, launches two new differentials

S&P Global Platts has updated specifications for its China copper cathode assessments and launched two new differential assessments, effective Feb. 8, 2021.

Platts originally published a proposal on Dec. 2, 2020, with the following note: https://www.spglobal.com/platts/en/our-methodology/subscriber-notes/120220-platts-proposes-to-update-specifications-for-copper-cathode-assessments-in-china-launch-two-new-differentials

Platts made a decision to implement the proposal on Jan. 27, 2021, with the following note: https://www.spglobal.com/platts/en/our-methodology/subscriber-notes/122820-platts-to-update-specifications-for-copper-cathode-assessments-in-china-launches-two-new-differentials

The changes include:

• assessing the premium and all-in price as single numbers
• normalizing to standard quality
• launching two new differentials assessments
• changing the incoterm to CIF basis
• expanding the delivery timing to 7-56 days
• specifying the basis location as CIF Shanghai
• changing the payment terms
• normalizing quotation periods to a standard "base month"

QUALITY AND NEW ASSESSMENTS: Platts normalizes price data for all qualities of copper cathode imported into China to generic Electrolytic Refining (ER) specification and assesses the price as a single number. Platts reflects LME-approved branded copper cathode with minimum 99.95% copper content. Platts has launched two new differential assessments -- one for higher grade ER cathodes, which generally trade at a premium to generic ER, and the other for copper cathodes produced using the solvent extraction-electrowinning process (SX-EW), which tend to trade at a discount to generic ER cathodes. Platts has observed that most ER cathodes imported into China are shipped from Chile, Peru, Australia, Europe and Japan, which make up the majority of liquidity seen in the market in recent years, and most of which is of standard ER quality with a minimum 99.95% copper content. Top brand ER cathodes are those produced by Corporacion Nacional del Cobre de Chile, commonly known as Codelco.

INCOTERM: Platts has changed the incoterm for copper assessments from C&F China to a CIF basis to align with the current market practice. Price information reported on a C&F China basis is normalized to CIF China. Insurance is currently typically valued at around $0.10/mt.

LOCATION: Platts has specified the basis of the assessment as Shanghai, China, with product delivered to other Chinese ports normalized to this standard. Platts analysis showed that Shanghai is a dominant delivery port for copper cathodes in China.

TIMING: Platts expanded the delivery window to 7-56 days forward in line with the prevailing market practice. Platts has observed that most spot cargoes are traded for arrival 7-56 days forward from the date of transaction. For example in Q4 2020, out of 43 spot transactions basis CIF Shanghai reported to Platts, 86% were for arrival to China 7-56 days forward.

PAYMENT TERMS: Platts considers Telegraphic Transfer (TT) and Documents against Payments (DP) as standard payment terms alongside the current 30 days letter of credit terms. All other payment terms are normalized to these standards.

BASE MONTH: Platts normalizes all bids, offers and trades reported as part of its assessment process for copper premiums to a base month, in order to ensure the time structure in underlying futures prices is accounted for when assessing the copper premium, and to compare all indications against the same base. Platts has observed that when different quotation periods are used, the structure (backwardation or contango) of the underlying futures market can materially affect the premium. The base month would be calendar month plus one, rolling on the first business day of the month. For LME contracts, monthly prompt dates are the third Wednesday of each month and these contracts are the equivalent to monthly futures. For example, for Feb. 1-28, 2021, Platts would normalize all indications to a premium over "March third Wednesday" future; from March 1, Platts would normalize all indications to premium over "April third Wednesday" future. Platts continues to consider all indications regardless of basis month or origin, and subject to Platts methodology & guidelines.

ALL-IN PRICES: Platts has rationalized the calculated all-in prices and amended the underlying methodology. Platts continues to publish the Copper C&F China $/mt Fixed Price Equivalent All-in price (MMCUC00) and its averages. This price is now published as a single number and represents a sum of the assessed premium and the most up-to-date value of the base future (month of assessment plus one).

As part of this rationalization, Platts will discontinue the Copper C&F China $/mt All-in price (MMAMJ00) and its conversion into Yuan/mt (MMCSC00), along with all other symbols related to these prices, effective April 1, 2021. Platts will issue a separate subscriber note to inform the market of this change on the effective date.

Platts assesses the C&F China copper cathode import premium in $/mt, and an all-in-value in $/mt.

The affected assessments are published on Platts Nonferrous Metals Alert fixed page MTL0106 and MTL0419 in Platts Metals Daily, on the Platts Market Center, and in the Platts price database under the codes listed below.

Updated changes:

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