London 15/12/2015 - China's biggest smelter, Jiangxi Copper, and Chilean miner Antofagasta have agreed to cut the annual copper treatment and refining charges (TC/RCs) for 2016 by nine percent to $97.35 per tonne/9.735 cents per pound, according to well-informed sources.
This is the first time Antofagasta has taken the lead in annual TC/RC negotiations and reached a benchmark settlement before US miner Freeport McMoran - the Jiangxi-Freeport agreement has for several years typically served as the industry benchmark. It was set at $107 per tonne/10.7 cents per pound in 2015.
Several sources thought the number was "reasonable" and believed that other miners would adopt the same figure for their own bilateral agreements or possibly adjust it by a few dollars based to reflect the various copper content in their mines.
Chinese smelters had started annual negotiations at $110/11 cents back in October, before recently reviewing their bid to $105 - one miner had last week claimed that a Chinese smleter had bid as low as $99/9.9 cents. Miners, meanwhile, had initially offered numbers around $90/9 cents before revising the figure up to $95/9.5 cents.
"Chinese smelters are willing to give in to a two-digit number which is still not far away from the initial $105-110 per tonne they had initially proposed. For them, the arbitrage ratio between the London Metal Exchange (LME) and Shanghai Futures Exchange (SHFE) was more important," said a trading source in Shanghai.
"Also, you need to take into consideration the renminbi depreciation - it was around 6.1 against the US dollar last year during the negotiations but now has depreciated to 6.4. If you multiply the rate with TC/RCs, you would arrive at similar levels," he added.
Spot TC/RCs, which miners pay to smelters to turn copper concentrates into refined copper, have declined to $105-108/10.5-10.8 cents per pound for clean, standard grade concentrate from 103-110/10.3-11 at the end of November amid light trading conditions ahead of the end of the year.
(Edited by Perrine Faye)