(MB) - Copper concentrate charges head lower
2002-08-23 17:01 (New York)
August 21 (Metal Bulletin) - Holidays and a paucity of supplies
have caused the global market for copper concentrates to
wither. However, demand is still strong and spot treatment and
refining charges (TCs/RCs) paid by mines to smelters are in the
low- to mid-$30s per tonne/3 cents per lb range.
"We haven't seen any sales below $30/3 cents yet but we are
very, very close to that level," said a trader. Another added
that traders are already paying miners at figures as low as
$25/2.5 cents.
The low charges are set to persist into next year. A 2003 frame
contract for concs from Australia's Reward mine was recently
understood to have settled at TCs/RCs in the mid-$30s/3 cents
range. Furthermore, a South American miner said it had received
unsolicited bids for spot purchases in 2003 at TCs/RCs in the
mid-$40s/4 cents.
"There is simply not the tonnes around to meet demand," said
another miner, adding that there is a "pretty strong argument"
to suggest that charges as low as those in the $20s/2 cents
range are possible.
Voracious demand from China and India is continuing to drive
the spot charges. A trader reported that in China, "for every
tonne of concentrates there are ten buyers". While there has
been no specific news of cutbacks associated with the concs
shortage, Chinese trade statistics show that imports this year
are running at lower levels than last year and a levelling out
of refined copper production looks inevitable.
Many mines have also reduced output this year, which is not
helping to ease the market. Chile's Escondida mine reported
that its July production was down 23.4% compared to last year.
It produced 51,575 tonnes of refined copper last month after
freak storms disrupted production. The mine is also processing
lower ore grades.
Meanwhile, Hindustan Copper Ltd's latest tender for 30,000
tonnes of concs could be hard to fulfil, said market observers.
The Indian smelter has been unsuccessful in acquiring any concs
in its two previous tenders, which have had strict limitations
on the amount of impurities permissible.
The delivery schedule is staggered, making it more likely that
traders will bid for the tender (it is to be conveyed in three
10,000-tonne lots on dates in October, December and February
2003). Nonetheless, several traders reckon that terms, if
submitted, will fall in the high $20s/2 cents.
A bout of short covering propelled the three-month LME copper
price upwards to $1,510 per tonne in the first ring session on
August 15, a steadier performance widely linked to the gains on
Comex.
Buying was almost entirely technical driven, one analyst said,
with prices also buoyed by better-than-expected US industrial
production figures in July.
But as in the past month - with copper clearly lacking
direction - the talk in the market is that copper is looking to
consolidate. This is seen as a more accurate assessment of the
market against a backdrop of weak fundamentals.
"The key point is that the weakness in the market has been
over-anticipated, leading to a big sell-off," one analyst said.
"There should be some short covering in the next few days but
the longer term outlook remains pessimistic," he added.
"There is no reason to suggest why buying should continue after
the short covering," commented another trader.
Barclays said in its daily report that the theme of current
copper price movements remains one of thin market conditions.
"We continue to favour the downside in copper, based on the
degree to which speculative funds on Comex are still long," it
said. "Weakness here could place further pressure on copper's
support area at $1480 per tonne," it added.
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