London 08/01/2016 - Spot copper treatment and refining charges (TC/RCs) have continued to decline this year, reaching four-month lows below $100 - the market has corrected following the usual seasonal fourth-quarter spike.
Average global TC/RCs for clean, standard-grade copper concentrates dropped to $89-99 per tonne/8.9-9.9 cents per pound from $95-105/9.5-10.5 cents before Christmas, their lowest level since mid-September. They had climbed to 10-month highs in November close to $110/11 cents.
Purchases by smelters were quoted in a range of $95-103/9.5-10.3 cents, down from $103-108/10.3-10.8 cents, while sales to traders slipped to $85-93/8.5-9.3 cents from $93-98/9.3-9.8 cents.
"There has been an adjustment and trades are taking place at two digits," a smelter source said.
As is often the case, Chinese smelters are the only spot buyers and trades were mostly reported with small companies. Members of the Chinese Copper Smelting Purchasing Team (CSPT) are better stocked and still able to get TC/RCs of around $100/10 cents, sources said.
"CSPT smelters are not in a rush to buy. But small smelters are more in a hurry and some have been having credit issues," a trader in China said.
"The Chinese are finally prepared to pay up now. Until now they had delayed purchases and relied on stocks [while] waiting for the benchmark to settle," a trader in Europe added.
Benchmark negotiations are only partially concluded but final numbers are certain to come in below $100/10 cents, which has prompted spot rates to adjust lower.
Chilean miner Antofagasta agreed on December 15 with Jiangxi Copper, China's biggest smelter, to cut the annual copper TC/RC for 2016 by nine percent to $97.35 per tonne/9.735 cents per pound.
This was the first time that Antofagasta had taken the lead in annual negotiations; a few other miners including Codelco have since adopted its number. But the usual bellwether, Freeport-McMoRan, has rejected it, hoping to get a few dollars more in talks that are scheduled to take place next week.
"Spot numbers are coming down but it's really slow. The only thing that matters now is the benchmark," a second trader in Europe said.
Others noted light restocking activity by traders and small Chinese traders before the Chinese New Year in the second week of February. Few new tenders have been reported so far this year, which may indicate limited spot selling from mines at present.
Market participants expect spot TC/RCs to remain at sub-$100 levels in the coming weeks, with a few smelters set to return to the market towards the end of January to restock and take advantage of a favourable import arbitrage.
Chinese copper ore and concentrate imports rose 37 percent month-on-month in November to 1.44 million tonnes, taking imports in the first 11 months of last year to 11.82 million tonnes, an 11-percent increase.
Meanwhile, mine output remains capped by low copper prices - at below $4,500 per tonne, they are still around six-year lows and below cash costs for many operations in Africa, China, Europe and the Americas.
More concentrate production is expected out of Peru's Las Bambas mine and Indonesia's Batu Hijau and Grasberg mines, however, provided that Freeport's export licence for the latter is renewed next month.
"The trend is for lower TC/RCs at this point," a trader in the US said.
(Additional reporting by Meimei Qin and Archie Hunter, editing by Mark Shaw)