Spot charges for processing copper concentrate in China have risen to their highest in eight months as the coronavirus outbreak and associated constraints on production and logistics leave smelters unable to take shipments.
Treatment and refining charges (TC/RCs), paid by miners to smelters to process copper ore into refined metal AM-CN-CUCONC, climbed to $62.50 a tonne and 6.25 cents a pound on Monday, as assessed by industry pricing and information provider Asian Metal.
On the day much of China went back to work after an extended Lunar New Year break, that was a rise of $1 from TC levels of $61.50 over the past month, and marked the highest assessment since June 10, 2019.
Smelters in China, the world’s biggest copper consumer, need less concentrate after the coronavirus outbreak because factory shutdowns and transport curbs mean they have not been able to offload high inventories of byproduct sulphuric acid, which are limiting their capacity to produce more copper.
Charges increase when there is more abundant supply of copper concentrate and go down when the market tightens. The annual miner-smelter TC/RC benchmark for 2020 was agreed at $62 a tonne and 6.2 cents a pound, the lowest in nine years amid rising smelter capacity and limited mine supply growth.
“Some smelters may cut production because of high sulphuric acid stocks. TCs may go up further,” one China-based trader said.
Guangxi Nanguo in Southwest China last week declared force majeure on copper concentrate shipments, sources told Reuters.
Daye Nonferrous, a major copper smelter in virus epicentre Hubei, has not declared force majeure but the shipping date for some concentrate supply has been delayed, a company official said. Daye did not immediately respond to a request for comment.
“The short-term rise in processing fees may be related to operating difficulties caused by the squeeze on smelter profits and the recent force majeure,” said Yao Wenyu, senior commodities strategist at ING in London.
The Daye official said the company relied on miners and traders in a 50-50 split for its copper concentrate supply, which mostly comes from South America. He declined to provide further details on the delays or to say what the smelter’s current operating rate was.
Almost 1,000 Daye employees are having to self-isolate at home due to the outbreak, while two have contracted the virus.
(By Tom Daly; Editing by Mark Potter)