Copper treatment charges for China seen at or below current levels in 2024

Global miners and Chinese smelters are expected to agree on a 2024 benchmark for copper treatment charges (TCs) around or below the current $88 per metric ton as smelting capacity expansion is likely to offset higher mine supply, industry sources said.

Miners pay TCs and refining charges (RCs) to smelters to process copper concentrate into refined metal, offsetting the cost of the ore. TC/RCs fall when tight concentrate supplies undermine copper smelters’ profit margins.

Despite an expected concentrate surplus, industry sources expect the TC/RCs benchmark in 2024 to be similar or lower to this year’s $88 a ton for refining and 8.8 cents per pound for treatment, which were six-year highs.

Miners polled by Reuters gave forecasts for the TC benchmark ranging from the $70s to below $88, while smelters gave predictions in the $85-$88 range. Two analysts each predicted a roll over of $88, and two traders both predicted $90.

“Smelters in China are running at full capacity and new projects are ramping up solidly,” said a miner source.

China’s monthly output of refined copper has been sitting at record levels above 1 million tons since March, boosting demand for copper concentrate.

Spot TCs in China, as assessed by index provider SMM, slid to $85.03 a ton on Nov. 3, having mainly stayed above $90 during May-October, which will likely play in miners’ favour ahead of the annual TC/RCs benchmark negotiation in Shanghai during Nov. 13-17.

Consultancy CRU forecasts a surplus in the concentrate market to grow from an expected 33,000 tons this year to 260,000 tons in 2024.

With expectations of ample supply earlier this year, China’s top copper smelters lifted their TC/RCs guidance for shorter-term contracts, setting it at $95 per ton and 9.5 cents per pound for the third and fourth quarters this year, the highest since 2017.

However, the TC/RCs benchmark is usually influenced by the market balance of the benchmark year and the year after, said analyst Craig Lang of CRU, using analysis of TC/RCs data from the past decade.

CRU predicts a deficit of 342,000 tons in 2025 for the copper concentrate market, as big smelters in Indonesia and India will likely operate in full swing.

The deficit could emerge as early as the second half of 2024 and into 2025, when large-scale smelting projects come online in China and elsewhere, said Antaike, a Chinese state-backed research house.

In addition, forecasts for concentrate supply and benchmark next year become more complicated due to uncertainty around whether miner Freeport-McMoRan FCX.N could continue to export concentrate from Indonesia beyond May 2024 as Jakarta pushes for more ore to be processed domestically.
Source: Reuters (Reporting by Siyi Liu in Beijing and Mai Nguyen in Hanoi; Editing by Tasim Zahid)