China's top copper smelters on Friday cut their minimum treatment and refining charges (TC/RCs) for copper concentrate by 10.3% for the second quarter of 2018, two people with direct knowledge of the matter said. At a meeting in Shanghai, the 10-member China Smelters Purchase Team set the second-quarter TC floor at USD 78 per tonne and the RC floor at 7.8 cents per pound, down from USD 87 per tonne and 8.7 cents per pound, respectively, in the first quarter, two people on the team said.
The miners pay the TC/RCs to the smelters to process their ore into refined metal. Falling minimum charges for processing point to a tighter market for copper concentrate and the new floor is the lowest since at least 2015. The drop comes after copper concentrate imports into China, the world's top consumer of the material in metal form that is used in everything from cars to computers, grew by 12.7% year on year in the first two months of 2018. The CSPT, which includes major Chinese smelters like Tongling Nonferrous Metal Group , Jiangxi Copper Co and Jinchuan Group , meets every three months to set the floor TC/RCs. Members are supposed to adhere to the floor in any processing deals with copper miners.
On the supply side, there have been concerns of disruptions at key copper mines in South America amid labour contract negotiations. But ahead of the meeting, one of the CSPT sources said he saw "little possibility" of strikes. Chris Wu, copper consultant at CRU in Beijing, noted that the CSPT had gone for a higher TC than the current spot price level of $73 per tonne.
This suggests the team is "not expecting serious strikes at mining assets or they are sort of well stocked for Q2," she said. But in going higher than current spot TC/RCs, the CSPT may also be thinking about protecting its margins going forward, Wu added.
