The world's largest copper miners and Chinese copper smelters are likely to set a higher refining/refining fee (TC/RCs) for the long-term copper concentrate supply contract for 2023, foreign media reported on November 18. "Chinese smelters as major buyers will have the upper hand in negotiations." Copper concentrate TC will soar to $100 a tonne in 2023, according to a Chinese smelter source cited by foreign media. Three other Chinese sources expect TC to be set at $80 to $90 a tonne in 2023.
According to industry insiders, following the global trade tradition of the non-ferrous mining industry, the TC/RCs benchmark cited in international copper concentrate supply contracts is usually taken from the first settlement of annual long term negotiations between large overseas miners and Chinese smelters, and the TC/RCs represents an increase or reduction in refining/refining processing fees. This usually means that the supply of copper concentrate has become more or less than the smelting capacity.
Earlier in late September, the China Copper Raw Materials Joint Negotiating Group (CSPT), a group of more than a dozen large copper smelters in China, raised the TC/RCs floor price for copper concentrate in Q4 2022 to $93 / ton/lb from $80 / lb 8 cents in Q3 to 9.3 cents per lb through an online meeting. After the increase, the processing fee increased by 32.9% compared with the fourth quarter of 2021.
CSPT members mainly include Tongling Nonferrous Metals, Jiangxi Copper, Daye Nonferrous Metals, China Gold, Silver Nonferrous Metals, Gansu Jinchuan, Yunnan Copper, Zhongtiaoshan Nonferrous Metals, Yantai Guorun, Zijin Mining, Fuye Heding and Huludao Zinc and other major smelters. The cumulative copper output of these smelters in China accounts for more than 85% of the country.
While the outcome of the process fee negotiations between international mines and Chinese smelters in 2023 has not been finalized, the industry is widely expecting a surplus of copper concentrate supply as the growth in global copper concentrate supply in 2023 is expected to exceed the growth in smelting capacity, sources said. And push the annual copper concentrate long association TC/RCs in 2023 significantly higher than that in 2022.
Nick Pickens, head of research at Wood Mackenzie, the international business intelligence consultancy, said the copper concentrate market would be oversupplied globally in 2023, with benchmark processing fees expected to be 20-30 per cent higher in 2023 than in 2022. That's $78 / ton / 7.8 cents/pound to $84.5 / ton / 8.45 cents/pound.
Colin Hamilton, managing director at BMO Capital Markets, said: "The year 2023 looks set to be a year of strong global copper concentrate growth, with limited new smelting capacity from Chinese copper plants in the same period, and copper concentrate supply growth likely to drive a bottleneck in smelting capacity for the first time in more than a decade as copper smelting capacity utilisation is already at its peak." It expects the benchmark price for processing copper concentrate imports to be $85 a tonne / 8.5 cents a pound in 2023.
However, global miners such as BHP Billiton believe rising demand for refined copper in China in 2023 will force Chinese smelters to rely on more copper concentrate feedstock and expect a more modest increase in processing fees. "There is no denying that the 2023 long order will be more skewed towards the smelter than 2022, and we expect the long order TC to rise appropriately to more than $70 per tonne in the 2023 copper concentrate negotiations," a BHP source said.
Gu Fengda, director of research and consulting department of Guosen Futures, said that China, as the world's largest manufacturing country, is also the largest importer of non-ferrous mining resources. In the past few years, due to insufficient domestic mining resources and excessive smelting and processing capacity, China's related industrial chain faced a serious problem of overseas resources "bottleneck". In particular, from 2020 to 2021, due to the tight supply of overseas resources caused by the COVID-19 epidemic, China's copper smelting industry is in a dilemma of "insufficient raw materials and loss of money in smelting".
Against this background, Chinese enterprises resisting the pressure, continuously practicing the long-term thinking of "expanding overseas resource investment, getting through industrial chain and forming combined forces", promoting foreign investment of metal resources such as copper, nickel, cobalt, lithium and other metal resources of our country quickly catching up with and catching up with domestic rights and reserves. Copper concentrate output of overseas investment mine of our country enterprises is far higher than domestic output of copper concentrate. This lays a foundation for the current Chinese copper industry to alleviate the resource "bottleneck" problem.
"With Chinese copper companies working together overseas to promote mine project development, the global copper concentrate supply gap narrowed in 2022 and concentrated release in 2023, global copper concentrate supply is expected to show a substantial improvement in the next three years." Gu Fengda predicted that Chinese smelting enterprises will take advantage in the copper concentrate long association negotiations in 2023, which may greatly expand the smelting profit margin. However, considering the pressure of structural adjustment and transformation and upgrading in the middle and downstream of the Chinese industry, the rise of global resource nationalism, geopolitical impact and the threat of overseas economic recession, Chinese related industries will need to make good use of two markets and two resources. Build a security system for China's resources.
