Antofagasta, Chile’s largest listed copper miner, has agreed to supply China’s two top smelting companies with copper concentrate in the first half of 2020 at treatment and refining charges (TC/RCs) in the mid-$60s per tonne/6s cents per lb, a source with direct knowledge of the matter said.
The highly unusual timing of the agreements, made with Tongling Nonferrous and Jiangxi Copper, is five months before the copper industry gathers in Shanghai to discuss the annual benchmark TC/RC during Cesco Asia week.
The terms agreed also mark a significant drop from the 2019 annual contracts agreed at $80.80 per tonne/8.08 cents per lb
, set by Antofagasta and Jiangxi and followed by the industry as a benchmark.
The half-year deals are closer in value to the spot copper concentrates TCs, which are at multi-year low levels on tight availability. Fastmarkets’ copper concentrates TC/RC index cif Asia Pacific
is at $52.4 per tonne/ 5.24 cents per lb as of Friday July 5, the lowest since the index was launched in 2013. TC/RCs are paid by miners to smelters to cover the cost of turning copper concentrate into refined metal.
The agreements with the two smelters are believed to involve roughly 100,000 tonnes of copper concentrates in total for the first half of 2020, another source added.
Antofagasta is expected to produce 750-790,000 tonnes of copper in 2019 from around 3-3.16 million tonnes of copper concentrates. A 100,000-tonne concentrates supply agreement could take up about 6.7% of Antofagasta’s half-year output.
These half-year arrangements are said to be growing in popularity among miners who used to sell their concentrates supply to smelters predominantly on an annual basis. Until now, only BHP was selling significant concentrates tonnage on a half-year or quarterly basis, leading the push away from the annual benchmark system toward a more flexible and spot-related pricing structure.
Antofagasta has also been challenging the status quo in the past four years, replacing Freeport once in 2015 as the leading miner involved in the TC/RC negotiations and showing openness to move away from annual terms with multiple pricing options.
Antofagasta declined to comment when reached by Fastmarkets on Monday July 8.
Jiangxi Copper and Tongling Nonferrous could not be reached by Fastmakets during multiple attempts to contact prior to publication.
Supply tightness supports move away from annual benchmark
The agreement comes at a time when Chinese copper smelters are in need of raw materials, indicated by a 16.6% year-on-year rise in copper concentrates imports in the first five months this year.
Tongling Nonferrous was the biggest importer of copper concentrates in China between January and April of this year, according to detailed customs data seen by Fastmarkets.
The smelter bought over 980,000 tonnes of imported copper concentrates, accounting for almost an eighth of the country’s total.
Jiangxi Copper, owner of major local mine Dexing, ranked third on the list, having purchased over 526,000 tonnes of imported copper concentrates in the first four months this year. This accounted for roughly 6% of the total.
That means that Tongling Nonferrous and Jiangxi Copper took up a combined 18% of Chinese copper concentrates imports during the period.
The two are also leaders in the benchmark TC/RC annual negotiations
- shouldering responsibility to determine the margin for the global copper smelting industry for the whole year.
In a deal signed in Shanghai in November last year, 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 $80.80 per tonne/8.08 cents per lb.
TC/RCs set in the deal, which is for January-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 reluctantly following suit in contracts
This is a developing story. More updates to follow.