Platts proposes to update specifications for copper cathode assessments in China, launch two new differentials

S&P Global Platts is proposing to update specifications for its China copper cathode assessments and launch two new differential assessments, effective Feb 8, 2021.

The proposed 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 is proposing to normalize price data for all qualities of copper cathode imported into China to generic Electrolytic Refining (ER) specification and assess the price as a single number. Platts would continue reflecting LME-approved branded copper cathode with minimum 99.95% copper content. At the same time, Platts proposes to launch 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 is also proposing to change the incoterm for C&F China copper assessments to a CIF basis, in line with current market practice. Should the proposal be implemented, price information reported on a C&F China basis would be normalized to CIF China. Insurance is currently typically valued at around $0.10/mt.

LOCATION: Platts is proposing to specify 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 is proposing to expand 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 Q3 this year, out of 93 spot transactions basis CIF Shanghai reported to Platts, 91% were for arrival to China 7-56 days forward.

PAYMENT TERMS: Platts is proposing to consider 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 would be normalized to these standards.

BASE MONTH: Platts proposes to normalize 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 Oct.1-31, 2020, Platts would normalize all indications to a premium over "November third Wednesday" future; from Nov. 1, Platts would normalize all indications to premium over "December third Wednesday" future. It is important to note that under this proposal Platts would continue to consider for assessment all indications regardless of basis month or origin (subject to Platts methodology & guidelines). This proposal is intended only to ensure that all indications are normalized to the same basis quotation period (QP), thereby providing the market with clarity about what the assessment itself represents.

ALL-IN PRICES: Platts is also proposing to rationalize the calculated all-in prices and amend the underlying methodology. Platts would continue to publish the Copper C&F China $/mt Fixed Price Equivalent All-in price (MMCUC00) and its averages. This price would be published as a single number and would represent a sum of the assessed premium and the most up-to-date value of the base future (month of assessment plus one). Currently this price is published as a low-high range and is calculated as a sum of the assessed premium and the previous day's futures cash settlement. As part of this proposal, Platts would 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.

With these proposed changes, all auto-calculated weekly and monthly averages, would also be affected.

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.

Proposed changes

Please send all comments, feedback and questions to PL_Asia_Nonferrous@spglobal.com and pricegroup@spglobal.com by Dec. 18, 2020.

For written comments, please provide a clear indication if comments are not intended for publication by Platts for public viewing. Platts will consider all comments received and will make comments not marked as confidential available upon request.