In a deal signed in Shanghai in November, China’s Jiangxi Copper agreed to purchase Los Pelambres and Centinela copper concentrates from Chilean miner Antofagasta
over the course of 2019 with TC/RCs set at $80.8 per tonne / 8.08 cents per lb.
TC/RCs set in the deal, which is for January to December tonnage shipment and has standard terms, tonnages and metal payables, is being taken as a benchmark across Asia, with major smelters in China, Japan and South Korea using the number in contracts, sources taking part in annual contract negotiations said.
“We are following the Jiangxi benchmark for sure,” a source from a smelter concentrates purchasing team outside of China told Fastmarkets.
Annual concentrate deals taking place affirm what is the lowest benchmark since 2013 but come amid consternation from some smelters due to well-supplied 2018 spot market that is dragging into next year.
Fastmarkets’ copper concentrate index
dropped by $2.60 per tonne and 0.26 cents per lb to $86.20 per tonne/8.62 cents per lb on Friday December 14
from the end of last month.
Spot TC/RCs, discounts on the metal price paid to smelters for converting concentrates into refined copper, are up close to their highest levels for the year.
Smelters in China and elsewhere are purchasing concentrates for first-quarter delivery with TC/RCs as high as $95 / 9.5 cents, spot deals reported to Fastmarkets show.
An unprecedented series of disruptions at major copper smelters
this year has driven units otherwise destined for long-term contract supply into the spot market.
As a result, major smelters were reluctant to accept the number, having previously expected that terms agreed between the world’s largest mining and smelting groups would have yielded a rollover of 2018’s $82.25 / 8.225 cents benchmark
Europe's largest copper smelter, Aurubis, had openly criticized the benchmark terms as "too low."
“Whether the settlement is a benchmark for Aurubis is a big question mark,” Christophe Koenig, Aurubis’ senior vice president of commercial told Fastmarkets
on November 23.
A company spokesman said the contractual treatment charges terms are currently a "work in progress" at Aurubis when responding to a request by Fastmarkets. No details have been provided.
Tongling sign up
Many in the China Smelter Purchasing Team (CSPT), a group of state-backed smelters, had also been holding out for a better number despite member and former leader Jiangxi Copper being part of the noted deal.
CSPT members were waiting for Tongling Nonferrous, the current leader of the bloc, to also sign up to the level.
Fastmarkets understands Tongling has subsequently agreed purchase contract deals at the $80.8 / 8.08 cents level and CSPT smelters consider the number a benchmark, sources at the company and business partners said.
The representative of Tongling Nonferrous also did not reply to the request for comment.
This follows Japanese smelters such as Pan Pacific Copper, South Korea’s LS Nikko as well as miners, including Freeport-McMoRan signing up to the number, sources with direct knowledge said.
Ahead of the deal breaking, some miners had been willing to accept marginally higher numbers than $80.8 / 8.08 cents, or shake hands on a rollover.
But with a lower number being agreed by major parties, miners are unwilling to take a worse deal.
“It’s really difficult to negotiate another, higher number,” a source at a Chinese copper smelter said.
“The only condition for other miners to come to the negotiation table would be that they ask for a lower number,” the smelting source said.
Additional reporting by Julian Luk in London and Anna Xu in Shanghai.