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Feature: Clean copper concentrate TCs stabilize at $60/mt as supply risks ease

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Feature: Clean copper concentrate TCs stabilize at $60/mt as supply risks ease

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Healthy margins, production cuts spur demand for higher cu content concentrate

Less spot supply available as sellers allocate more tons via term contracts

Treatment charges for clean copper concentrate remain supported by limited spot supply despite new copper mines starting production in the second half of the year and major strikes being averted, market sources said Oct. 4.

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China's spot clean copper concentrate treatment charge and refining charge (TC/RC) was assessed at $61.50/mt and 6.15 cents/lb respectively Oct. 1, largely stable from the day before, S&P Global Platts data showed. Spot transactions have remained rangebound around the $60/mt mark for the past two months for trader to smelter sales.

New production from Serbia's Timok, Congo's Kamoa, China's Zijin Yulong and Indonesia's Grassberg has provided additional supply to the market in H2, while major strikes have been averted by workers at Chile's Escondida mine approving a new contract with BHP Aug. 12 and two unions at Chile's Andina copper mine agreeing to a new contract with Codelco Sept. 2.

China's premium for domestic copper cathode rose by around Yuan 300/mt ($46/mt) over May 12-Sept. 30 due to improved domestic demand and tight scrap copper supply.

Some Chinese smelters without urgent demand are also interested in buying high cu content raw materials in a bid to increase copper cathode production. But the new supply entering the market in H2 has been largely high impurity content concentrates from Grassberg and Timok, which most Chinese smelters have no interest in importing.

"Traders with the facility to blend have to buy more clean concentrates to process increasingly complex concentrate cargoes, resulting in fewer clean tonnages for sale," a source said.

Spreads between clean and complex copper concentrates widened in September due to low liquidity for high impurity cargoes.

Falling copper content for some major brands such as Chile's Los Bronces has also compelled smelters to source higher cu content clean concentrates.

But a rapid rise in spot TCs over April-July prompted caution among smelters in restocking, and sellers allocated more cargoes through term contracts in August as spot cargoes traded above the annual benchmark level.

"This resulted in limited spot offers for Q4 shipments as many sellers have no spare cargo to offer," a trader said.

Uncertain Q4

Despite the limited number of spot offers for clean copper concentrate seen available, market participants doubted spot TCs would dip into the $50s/mt range in the fourth quarter as power cuts being implemented in China as part of energy conservation plans impact copper concentrate demand.

"Although it has mostly impacted copper cathode production at the moment, the power cuts will impact anodes production in the end," a smelter source said.

Large-size smelters were buying cautiously as there was no clear deadline for when the power cuts would end. Copper smelters in Yunnan, Guangxi and Anhui provinces are reportedly grappling with power cuts in the range of 15%-30%.

Buyers were also concerned that pollution control policies may also impact smelters in northern China ahead of the Winter Olympics in Beijing next February.

"Production utilization rate is unlikely to go up across the winter," a procurement source said.

The delayed restart date for Dongying Nonferrous' second copper production line has also added uncertainty to copper concentrate demand. The second production line with a copper production capacity of 280,000 mt/year had initially been due to restart in October, but the dateline had still yet to be confirmed as of Oct. 4, market sources said.