Chinese copper smelters raise TC/RCs for 2022 term contracts in benchmark deal

In a benchmark deal, China's leading copper smelters have raised treatment and refining charges (TC/RCs) for 2022 by $5.5/mt and 0.55 cents/lb, respectively, from 2021 levels, industry sources said Dec. 16.

Chinalco China Copper Co. Ltd., Jiangxi Copper Corp. Ltd., Jinchuan Group and Tongling Nonferrous Group set the annual benchmark TC/RCs under term supply contracts at $65/mt and 6.5 cents/lb, respectively, entering the deals with miner Freeport-McMoRan, sources said.

TC/RCs are the fees miners pay to smelters for converting copper concentrate to copper cathode and are a key revenue source for smelters.

The rise in charges indicate easing of concentrate market supply in 2022, as the impact from COVID-19 eases and new industrial capacity comes online, sources said.

Miners have remained in an advantageous position over the past few years amid tight supply of copper concentrates led by ceaseless expansion of refining capacity in the industry.

Smelters lose negotiating power at a time of tight concentrate supply as they need to secure feedstock supplies, leading to lower TC/RCs charges.

S&P Global Platts assessed the CIF China Clean Copper Concentrates treatment and refining charges at $58.2/mt and 5.82 cents/lb, respectively, Dec. 16, down by 30 cents/mt and 0.03 cents/lb from Dec. 15.

Earlier this year, spot treatment and refining charges for copper saw continued drops due to supply tightness. TC/RCs fell to $28.70/mt and 2.87 cent/lb, respectively, April 13, the lowest level since Platts started the assessment Feb. 1.

Peru mine closure

Meanwhile, production is set to come to a halt at a key mine in Peru, a major copper-producing country. MMG said Dec. 16 that production at its Las Bambas mine would cease Dec. 18, as negotiations with protesters to lift a blockade that has restricted the entry of key consumables into the mine failed to reach a resolution.

"Production to Dec. 18 is estimated at 290,000 mt of copper in concentrate," MMG said in the statement. "Stockpiles on site are now approximately 60,770 mt of copper in concentrate."

Market participants said they were expecting limited impact to the spot market from the mine's closure.

Chinese smelters are in no hurry to purchase concentrate now, given current high inventory, sources said. However, it will put some pressure on companies relying on external concentrate supplies in the long term.