Asia Copper Week: Chinese smelters need treatment charges higher than current spot rate

China Daye Non-Ferrous Metals Mining

20/11/2019 06:13

* Jiangxi Copper needs TC at $75/T
    * Daye Nonferrous Metals sees break-even TC at $72.5/T
    * Low sulphuric acid price adds pressure on smelters

 (Recasts, adds details from Daye Nonferrous Metals in paragraph
3)
    By Tom Daly
    SHANGHAI, Nov 20 (Reuters) - Two leading Chinese copper
smelters need charges for processing copper concentrate into
metal to be higher than the current spot rate to avoid losing
money, as they negotiate with miners on a benchmark for 2020,
company executives said on Wednesday.
    Jiangxi Copper Co  600362.SS   0358.HK  needs treatment and
refining charges (TC/RCs) of around $75 a tonne and 7.5 cents a
pound to avoid losing money, its vice president of trading Xu
Yuanfeng said on Wednesday on the sidelines of the Asia Copper
Conference.
    Zhai Baojin, Daye Nonferrous Metals Group's president, said
later to reporters that his company needs TC/RCs to be at least
$72.50 a tonne and 7.25 cents a pound to break even.
    Smelters including Jiangxi Copper and Daye are in the midst
of negotiations with miners, running concurrently to the
conference this week, to set an annual TC/RC benchmark for 2020.
    The TC benchmark is referenced in miner-smelter contracts
worldwide and plays a big role in determining the profitability
of both sides. It is $80.80 a tonne for 2019 but current spot
levels are around $60, pointing to a much lower benchmark next
year. 
    "We hope [the TC] is higher than $75, otherwise we will make
a loss," Jiangxi Copper's Xu told reporters, adding that the
company was currently losing money and that prices for sulphuric
acid, a byproduct of copper concentrate smelting, were also low,
"which will reduce our profits and add more pressure."
    Miners pay the treatment charges to smelters to process
copper concentrate into refined metal. TC/RC prices tend to rise
when copper concentrate supply is abundant and fall when the
supply tightens.
    Xu said basically all of Jiangxi Copper's imported copper
concentrate was sourced on long-term contracts, meaning the
company's exposure to the spot market is small and underscoring
the importance of a favourable settlement with miners this week.
    Javier Targhetta, senior vice president for marketing and
sales at miner Freeport McMoRan Inc, said on Tuesday that he
thought a "reasonable" benchmark for 2020 would be $60.
 urn:newsml:reuters.com:*:nL3N27Z2HC
    Speaking in a panel session at the conference, Xu said
copper miners and smelters were part of a community with a
"shared destiny" and should work together more to develop more
applications for copper. "Mines should not be willing to see
their partners suffering a loss," he said.
    Jiangxi Copper will not be importing more copper concentrate
due to China's restrictions on scrap since the company only
imports "a few thousand tonnes" of copper scrap per month, but
quotas issued for imports were "not enough", he told reporters.
    China has so far issued import quotas for around 550,000
tonnes of high-grade copper scrap since restrictions were
tightened from July this year.

 (Reporting by Tom Daly; Additional reporting by Emily Chow;
Editing by Christian Schmollinger)
 ((tom.daly@thomsonreuters.com; +86 10 5669 2119;))