London 13/05/2016 - Copper concentrate treatment and refining charges (TC/RCs) have risen further over the past few weeks, with smelters now starting to buy spot material at levels around the annual benchmark for the first time this year.
Overall TC/RCs, the discounts on the copper price paid to smelters for the costs of processing concentrate into refined metal, rose to $87-97 per tonne/8.7-9.7 cents per pound for clean, standard-grade material, up $5/0.5 cents from the previous FastMarkets assessment two weeks ago.
Spot buying has been steady but smelters are spoilt for choice given plenty of nearby offers in the market from trading houses and mining companies.
Amid a lack of complex, high-arsenic concentrate available from mines such as Chinalco's Toromocho or Codelco's Ministro Hales, many traders are long on clean concentrates and, with terms on the up, are taking the opportunity to sell.
"The more you wait, the worse it is so it maybe better to fix the loss now and not keep holding the material and settle for much higher TC/RCs later," a mining source said.
Spot terms for smelters in China have therefore risen further, with smelters there now buying spot concentrates in the range of $94-99/9.4-9.9 cents - in line with the $97.35 /9.735 cents benchmark agreed for annual supply contracts in 2016.
"Some smelters are asking for three digits but this is not happening," a trading source said.
Several smelters are carrying out maintenance, including Birla Copper, Aurubis Pirdrop. This is freeing up some scheduled units for spot consumption.
On the other hand, China Minmetals started feeding its Shuikoushan smelter this week and stocks at Chinese smelters are not high, several sources said.
But the real pressure on copper concentrates supply is coming from the increased availability of clean tonnages - mining output of clean material has risen while that of complex material has dropped.
Traders, who bought clean tonnages with aggressive terms as low as the $60s/6 cents just two months ago, have been left high and dry without the key material they need for making profitable blends.
Accordingly, TC/RCs spot deals between miners and traders have risen to $85-90/8.5-9.5 cents from $80-85/8-8.5 cents a fortnight ago. Few tenders are outstanding in the market but there have lately been a smattering of trades directly between mines and merchants.
The disruption rate for copper mining will be at its lowest since 2004 if the current smooth running of operations continues, Macquarie analysts have predicted.
Annualised copper mining disruptions are at 1.9 percent so far in 2016, down from a heavy 5.8 percent last year.
This is simply another factor adding to concentrate oversupply at present although, with outright prices falling to two-and-a-half-month lows on May 12 below $4,700 per tonne on the LME, the market is again starting to ponder cuts on the supply side to restore balance.
"It's right on the cusp of cost structures - you almost need a drop in the price to make people cut supply a bit," a second mining source said.
(Editing by Mark Shaw)