PHYSICALS FORTNIGHTLY - Spot copper TC/RCs at 2016 highs, BHP books mid-year annuals

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London 08/07/2016 - Copper concentrate treatment and refining charges (TC/RCs) remained at 2016 highs this week while spot demand was thin and smelters continue to use the oversupplied market as leverage against sellers of clean material.

Overall TC/RCs, the discounts on the copper price paid to smelters for the costs of processing concentrate into refined metal, held at $98-103 per tonne/9.8-10.3 cents per pound for clean, standard-grade material, the same level as FastMarkets' assessments two weeks ago.

Sales to smelters continue to take place at $100-105/10.0-10.5 cents, up from $97-102/9.7-10.2 cents one month ago but the same level since our last report. 

BHP Billiton has settled mid-year annual copper TC/RCs with two key smelters in Japan and South Korea in the triple-digits, industry sources claimed.

This follows news that the China Smelters Purchasing Team (CSPT) lifted its lower limit for third-quarter copper concentrate purchases by 21 percent to $103/10.3 cents from $85/8.5 cents for the second quarter and the annual benchmark of $97.35/9.735 cents for 2016.

With TCs continually rising and more clean concentrates being offered onto the market, smelters are finding it increasing easy to leverage miners into offering more competitive parcels - deals have been heard as high as $106 for lots in the forthcoming quarter.

Most smelters in China, India, South East Asia and Europe have told FastMarkets that they are well-supplied for now although miners have suggested that some are still willing to take tonnages for nearby delivery if offered competitive terms.

"The recent trading volume is very thin," one large Chinese smelter told FastMarkets. "The current period is a very important battling period between smelters and miners/traders - smelters want to maintain the current level while miners want to tighten the market in the third quarter." 

"We haven't bought any [concentrates] as we are well supplied but we can easily do deals above $100," another smelter said.

For some miners, weather-related disruptions in parts of China are a reason for concern. Heavy rains in Southern and Eastern parts of China have resulted in transport delays for some metals producers, although there has not yet been any major impact on the concentrates market. However, several downstream copper fabricators have reportedly been forced to shutter production.

"The heavy rains have some impact on [copper] cathode sales in Wuhan and Nanjing. It's hard to transport the output," a source from a major copper smelter said.

Traders, on the other hand, are still able to make a small differential on sales from miners - deals to traders are still taking place at $95-99 for third-quarter shipment.

Still, in a marked change from the beginning of the year, public tenders from miners for tonnages in the coming months have gone quiet. Instead, miners are said to be exercising options within long-term contracts with traders to maintain deals at and below the annual benchmark rate of $97.35/9.735 cents for 2016.

But negotiating may prove difficult because most believe that TC/RCs have not finished climbing yet - there is an expectation that they will rise to $105-$110/10.5-11 cents within the next two months.

"There's potential for the TC to keep going up - we will see an upside trend in the rest of the year due to good supply from miners and less disruptions than expected," a smelter said.

But some miners expressed different views. Some expect TC/RCs numbers to fall back below three digits and the market to become much tighter in the last quarter this year compared with previous years because trading houses might have sold too much in the second quarter.

"Smelters and traders are losing momentum to buy or sell so the market will be stable for a while and then we may see some corrections late in the third quarter," a mining source said.

In miner-specific news, the Las Bambas copper mine in Apurimac in Peru achieved commercial production on July 1, majority owner MMG announced on Thursday. Ramp-up of the plant and commercial production were on schedule.

On the smelting side, some smelters in the European Union and Japan are scheduled for maintenance over the summer. The Aurubis-owned Pirdrop smelter in Bulgaria has finished its 50-day works programme but KGHM will carry out some work on its smelters in Poland, sources said.

(Reporting by Ian Walker and Meimei Qin, editing by Tom Jennemann)



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