18 Jun 2009 14:28

China's spot copper TC/RCs to edge up in Q3 - analyst

By Ginger Ding

Shanghai. June 18. INTERFAX-CHINA - Spot copper treatment and refining charges (TC/RCs) in China, which overseas miners pay Chinese copper smelters when selling copper concentrate, are expected to rebound slightly from current lows in the third quarter of 2009, an industry analyst told Interfax on June 18.

Chinese copper smelters are receiving spot TC/RCs of around 30/3.0 at the moment, which represents a drop of more than 60 percent from the 90/9.0 level seen at the beginning of the year.

"Tight copper concentrate supply, resulting from a slide in output by overseas miners and a rise in production by Chinese smelters, has pulled down spot TC/RCs. However, as average domestic copper smelters are unprofitable when spot TC/RCs are below 60/6.0, this situation will not last long, especially whencurrently low prices of sulfuric acid (a by-product from the copper smelting process) of around RMB 100 ($14.64) per ton are taken into consideration," Yang Changhua, an industry analyst with Beijing Antaike Information, said.

That said, TC/RCs will not rebound substantially this year, but may increase slightly to around 50/5.0 in the third quarter due to copper price corrections in the coming months as well as increased mining activity in a bid to capitalize on current high refined copper prices, Yang said.

The three-month copper contract on the London Metal Exchange (LME) jumped by 55 percent from the start of 2009 to $4,980 per ton on June 17, which is mainly attributable to China's high import volumes in the first few months of the year.

Yang said that China's refined copper imports have already slowed down, but due to a delay in cargo delivery, the decrease will only start to become evident in June. As a result, LME copper prices may drop to the $4,000 per ton level in the third quarter of the year, which will may prompt copper concentrate traders to rush to lock in sales, further giving Chinese smelters the upper hand in settling spot TC/RCs.

An employee, surnamed Xu, from Jiangxi Copper Co. Ltd., one of the largest copper smelters in China, previously told Interfax that in 2009, spot TC/RCs are unlikely to reach 75/7.5, the level agreed on for this year's contract TC/TCs by major domestic copper smelters and overseas miners in January, as there will be additional refined copper production facilities kicking off operations before the end of the year, which will drive up copper concentrate demand and depress spot TC/TCs.

So far in 2009, Chinese copper smelters have maintained a high average production capacity utilization rate of around 80 percent. Antaike's latest forecast estimates China's refined copper production in 2009 to reach 3.95 million tons, up 5.6 percent from the previous year.

According to Yang, since the beginning of the year, the world's copper concentrate production has slipped by 1 percent from that of 2008. Total global copper concentrate output stood at 12 million tons last year.