Mongolia's Oyu Tolgoi declares force majeure on copper concentrate shipments to Chinese buyers

Turquoise Hill Resources has declared force majeure on Oyu Tolgoi copper concentrate shipments to Chinese buyers after China suspended border crossings from Mongolia due to COVID-19 precautions, the company said in a statement March 30.

Sources at four Chinese smelters impacted by the force majeure said they received an email from Rio Tinto that April shipments would be delayed. Rio Tinto owns 50.8% of Turquoise Hill Resources, which owns 66% of Oyu Tolgoi. Rio Tinto manages the operation on behalf of the owners.

A representative for Rio Tinto did not immediately respond to S&P Global Platts' inquiries.

One smelter source said the producer was not yet able to provide a timeline on how long the impact would last.

"I believe the producer is working with the Chinese government closely to resume the shipments soon," the smelter source said.

Oyu Tolgoi suspended shipments on March 15 after two workers was diagnosed with COVID-19, and declared force majeure some time later because "the producer had inventory at warehouse," a smelter source said.

The Oyu Tologoi mine, located in southern Mongolia, is one of the world's largest known copper and gold deposits. It produced 149,631 mt of copper in 2020.

Market views on the likely impact of the outage on China's spot treatment charges were mixed.

With few offers seen for April-loading clean copper concentrate, some sources the difficulty in finding substitutes would place downward pressure on TCs.

"If the force majeure lasts for a while, it will drive spot TCs even lower," a trader said.

However, other smelter sources expected the impact would be limited as the main buyers of Oyu Tolgoi output were northern China smelters, and those smelters expect shipments will resume soon.

"If the transportation issue can be settled in April, it would have no impact to us," a source at one smelter in northern China said.

S&P Global Platts assessed CIF China Clean Copper Concentrate treatment and refining charges or TC/RCs at $29.10/mt and 2.91 cents/lb, respectively, March 30, up 10 cents/mt day on day.