London 27/05/2016 - Copper concentrate treatment and refining charges (TC/RCs) have risen above $100 for the first time this year - deals are now taking place firmly above the annual benchmark level for 2016.
Overall TC/RCs, the discounts on the copper price paid to smelters for the costs of processing concentrate into refined metal, rose to $93-100 per tonne/9.3-10 cents per pound for clean, standard-grade material, up $5/0.5 cents from the previous FastMarkets assessment two weeks ago.
Smelters are spoilt for choice for spot shipments, traders said, particularly for delivery at the end of the second quarter - large tonnages are being offered by South American mines and some pan-Asian groups at competitive rates. Still, most smelters, particularly in China, are amply stocked with concentrates.
"We're covered for the year - we're unlikely to go into the spot market again this year," one smelting source said.
And with the spot market increasingly well supplied, traders are forced to raise terms to draw in buyers, with trades above $100 now being reported. Sales to smelters are now taking place at $97-$102/9.7-10.2 cents, up from $94-99/9.4-9.9 cents, their highest this year.
"It's very quiet, actually," one trader said. "The Japanese are not buying - they all want to defer; the Chinese are full until July and they want to defer; The Indians are full - in fact, they are overloaded so not seeing any demand. That's why the clean is going very close to $100 now."
The general consensus also seems to be that terms will continue to rise. Smelters are therefore willing to wait for what they forecast to be a clear upward curve for the second half of the year.
"My view is that TC/RCs are going to continue at these current levels unless there is a supply disruption," a mining source said.
On the smelting side, Indian producer Birla Copper has restarted operations at its Dahej smelter in Gujarat, FastMarkets understands, after an extended period of maintenance. And the Aurubis-owned Pirdrop smelter in Bulgaria is scheduled to finish maintenance at the end of May.
The differential between sales to smelters and sales to traders continues to narrow - sales to traders, who are eschewing tenders in favour of direct sales negotiations with mining companies, are taking place at $90-95, up $10 from two weeks ago and dramatically higher than lows of $60 just two months ago.
"These guys were buying stuff in expectation about tighter market due to a pessimistic copper market towards the end of last year and assumptions that there would be supply cuts and high-arsenic [levels in material]. Now they're caught with a whole load of material which they can't get rid of," a second trader said.
Traders no longer need to offer terms aggressively to secure tonnages - mining output of clean material has risen while that of complex material has dropped. The narrowing in the differential, which one source called a "return to normality", means that mines have been approaching smelters directly for business, some traders reported.
With a lack of high-arsenic material available to create blends, traders are long on clean concentrates. This state of affairs is being compounded by the smooth operation of mines such as Newmont's Batu Hijau, which had its Indonesian export licence renewed for another six months.
"Some smelters expected that it could take more time as it has been in previous cases - one or two months - so the market has been taken by surprise and the [upward] TC/RC trend won't change," a third trader said.
(Reporting by Ian Walker and Archie Hunter, editing by Mark Shaw)