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UPDATE 2-China copper smelters lift treatment charges floor as benchmark talks loom

(Adds quotes of analyst)

BEIJING, Sept 29 (Reuters) - China’s copper smelters raised on Tuesday the floor levels of fourth-quarter treatment and refining charges (TC/RCs) by 9.4% from the prior three months, said two sources with direct knowledge of the matter.

The floor price set by the biggest smelters of the world’s largest copper consuming nation paves the way for a discussion later this year on the 2021 benchmark TCs/RCs level. The benchmark is referenced in term supply contracts and partially determines the profitability of both smelters and miners.

The 12 members of the China Smelters Purchase Team (CSPT) set the floor at $58 per tonne and 5.8 cents per pound at a meeting in the southeastern city of Ningde, said the sources, who declined to be named as the information was not public.

That compared to a $53-per-tonne and 5.3 cents-per-pound floor in the third quarter and $66-per-tonne and 6.6 cents-a-pound in the same quarter last year.

The prices are “also much higher than the current spot market, which means the smelters believe there will be improved supply of concentrate in the future,” said Sifang Liu, a senior consultant at Wood Mackenzie.

Miners pay TC/RCs to smelters to process copper concentrate into refined metal, offsetting the price of the ore itself. Charges go up when more supply is available, giving smelters more bargaining power.

“We do see improved supply of concentrate coming through next year and are forecasting a 7% increase in global copper concentrate production in 2021. We are also expecting a recovery in TC/RC, both spot terms and annual benchmark,” Liu added.

The CSPT members - who include top Chinese smelters Jiangxi Copper Co and Tongling Nonferrous Metals Group - are supposed to adhere to the floor in any spot processing deals.

The smelters typically raise the TC/RC floor for the final three months of the year ahead of negotiations with miners on the annual TC/RC benchmark.

The 2020 TC benchmark was agreed at $62 per tonne but spot TCs in China AM-CN-CUCONC have languished around $51.50 since late July - the lowest in eight years - as Chinese copper demand recovered from the coronavirus outbreak but fears over mine supply grew.

This year’s copper “mating season” - when supply contracts are signed for the year ahead - looks set to be an online affair following the cancellation of major industry gatherings such as LME Week in London and Asia Copper Week in Shanghai, where a miner-smelter settlement is typically made.

Reporting by Shivani Singh in Beijing and Mai Nguyen; Editing by Christian Schmollinger and Muralikumar Anantharaman

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