Glencore, Trafigura target spot prices for mined copper sales
Glencore and Trafigura are pushing Asian smelters to accept low spot prices for turning their mined copper into metal this year, as opposed to industry benchmarks that are much higher, three sources with knowledge of the matter said.
Historically, the industry has used annual benchmarks for their fees, known as treatment charges (TCs), for contracts to process concentrate into copper.
But London-listed Glencore (GLEN.L) and Trafigura want to base TCs on the spot market, where the expansion of Chinese and global smelting capacity, as well as tight concentrate supplies have depressed processing charges.
Commodity traders Glencore and Trafigura are offering to pay Asian smelters TCs linked to a basket of assessments from price reporting agencies including Fastmarkets and SMM for 2024 supply, the sources said.
The sources spoke on condition of anonymity because they were not authorised to speak publicly on the matter.
The two trading houses also aim to impose caps on TCs to lock in margins in the event of an increase in supplies of mined copper that could drive up TCs.
Supplies last year were estimated at around 22 million metric tons, and some analysts have said the market this year could move into deficit if supply disruptions continued.
A source at a major smelter said unless supply improved after the Lunar New Year in February, smelters might have to accept the trading houses’ terms.
Both Trafigura and Glencore want to cap TCs in the mid-$60s a ton area, a second smelter source said, adding that the cap could vary depending on volumes and relationships. The sources said there was no floor, only proposed caps.
Glencore and Trafigura declined to comment.
Ahead of China’s Lunar New Year holiday beginning on Feb. 10, activity in the top producer and consumer will slow down.
The shortage of material following supply chain disruptions and the increase in China’s smelter capacity have pushed concentrate processing charges down to around $40 a metric ton on the spot market, 50% below the benchmark of $80 a ton.
The $80 a ton was agreed between Chilean miner Antofagasta and China’s Jinchuan Group [RIC:RIC:JCGRP.UL] last November, before closure of Panama’s mine and a major cut in Anglo American’s guidance in December.
China is home to half of the world’s copper smelters and the largest buyer of raw copper materials including concentrates and scrap. Its imports of copper ore and concentrate in 2023 hit a record high of 27.54 million tons, up 9.1% from 2022, customs data showed.
Glencore supplied the world with more than one million tons of copper metal and concentrates in 2022 and its guidance for 2023 is also around one million tons.
Trafigura does not disclose the size of its copper portfolio, but the firm supplies smelters around the world with copper concentrate.
SOURCE:Reuters
