Latest news with #smelters
Reuters
11 hours ago
- Business
- Reuters
Copper smelters are facing both market and pricing crises
LONDON, June 20 (Reuters) - Copper smelters are now so desperate to find raw material they are paying miners for converting their concentrates into refined metal. So-called treatment and refining charges (TCRC) should be a core revenue stream for copper smelters but spot charges have been negative since the start of the year and the mid-year negotiations have also kicked off with a negative number. Low treatment charges feed copper's perennial bull narrative of too little mine supply but the current implosion in processing fees is as much about too much demand from too many new smelters. The imbalance looks unsustainable, particularly if smelters accept a negative charge for the mid-year talks, which set the price for much higher volumes than the spot market. But equally unsustainable is the copper industry's preference for pricing concentrates on an annual or semi-annual basis. The good news for smelters is that spot treatment charges appear to have stopped falling. The bad news is that they have done no more than stabilise at $-45 per ton (TC) and -4.5 cents per lb (RC) level, according to Benchmark Mineral Intelligence. Smelters which chose to lock in tonnages over the full year are partly insulated but this year's benchmark terms of $21.5 per ton were also the lowest in at least 20 years. The mid-year negotiations look likely to generate a still lower outcome, although smelters will understandably balk at locking in a negative TCRC for contracts that could run into 2026. Smelters have a couple of financial life-lines in the form of valuable by-products such as gold and silver. They also produce sulphuric acid, which has been rising sharply in price in China thanks to demand from the phosphate fertilizer industry. But a copper smelter's main source of income should really be copper, which is clearly not the case right now. It's not as if mines haven't been increasing production. Global output rose by 2.1% in 2023, 2.8% in 2024 and by another 1.2% in the first quarter of this year, according to the International Copper Study Group. China's imports of copper concentrates have been running strong, hitting a new annual high of 28.2 million tons bulk weight last year and up 7.5% year-on-year in the first four months of 2025. It's just that too much Chinese smelting capacity has been brought on line too quickly with newcomers chasing down available tonnage. Scrap is an alternative feed for some but this is an increasingly competitive market and Chinese imports of copper recyclable material are no more than flat so far this year relative to 2024. The rapid scale-up of Chinese processing capacity is clear to see in the country's production of refined metal. May output jumped by almost 14% year-on-year, according to the National Bureau of Statistics. Local data provider Shanghai Metal Market estimates production so far this year has grown by 11% over 2024 levels. A couple of Western smelters have already closed under the margin squeeze. Glencore (GLEN.L), opens new tab placed its Pasar smelter in the Philippines on care and maintenance in February. Sinomine did the same with its Tsumeb plant in Namibia earlier this month. But Chinese operators are doubling down in what appears to be a last-man-standing strategy. The world's mines are not going to be able to lift collective output by the same margin as China has increased smelting capacity. And the stresses in the raw materials supply chain are only going to get worse as new smelters fire up in Indonesia, ending the country's role as a key concentrates supplier to Asian smelters. Something will have to give, particularly since Chinese copper demand is expected to cool due to a scaling-back of subsidies for the over-heated solar panel sector. But with Chinese smelters not blinking, it could take some time before the current supply-demand imbalance is corrected through more capacity closures. That means more stress also on the industry's price discovery process, which is still rooted in annual deals. There has been some movement towards quarterly pricing and even spot pricing but largely in China. This, as smelters are finding out, is a big problem if the annual price is a negative number. A negative mid-year deal sets an ominous precedent. Markets such as iron ore have moved away from annual benchmarks which couldn't capture spot price volatility or sudden shifts in supply dynamics. Even lithium, widely perceived as too bespoke a commodity for standardised futures trading, can now be hedged on a liquid CME contract. It may be time for copper smelters to have a fundamental rethink about how they price their role in the processing chain. Because right now they're quite literally giving money away to the miners. The opinions expressed here are those of the author, a columnist for Reuters
Bloomberg
2 days ago
- Business
- Bloomberg
China Copper Smelters Match Record as Foreign Rivals Falter
Chinese copper production stayed at record levels last month, despite a plunge in the fees charged by smelters, piling the pressure on operations elsewhere in the world that compete for feedstock. Output of refined copper matched the previous month's all-time high of 1.254 million tons, although there was an extra day in May. That pushed volumes over the first five months 8% above last year's level, even as spot treatment charges have turned deeply negative as too much capacity chases insufficient supplies of ore.
Bloomberg
08-06-2025
- Business
- Bloomberg
China's Copper Boom Under Threat as Miners Test Bargaining Power
The unrelenting expansion of Chinese copper processing capacity over the past few years has now become a global headache, as smelters scramble to secure the ore they need to produce the vital industrial metal. Output in the world's top producer of the refined metal has ballooned to a record this year, even in the face of trade tensions wars that are clouding the outlook for demand. The resulting competition has handed bargaining power to some of the world's largest miners.
Finextra
23-05-2025
- Business
- Finextra
Can industrial metals hold up if the US-China truce falters in H2?: By Prakash Bhudia
Copper's soaring. Silver's holding ground. And a shaky 90-day trade truce between the US and China has markets breathing a little easier - for now. But under the surface, things aren't quite so smooth. Copper's been swinging wildly, smelters are running on negative margins, and silver's safe-haven shine is fading fast. China's buying big, but stockpiles are thinning, and treatment fees are deep in the red. As H2 looms, the real question isn't whether metals can climb - it's whether they can stay there when the trade peace starts to crack. The trade truce that bought time Markets love a good headline - and the 90-day US-China tariff pause delivered exactly that. After months of tit-for-tat tariffs and escalating tension, both sides agreed to put the brakes on. Tariffs were slashed dramatically: the US trimmed duties on Chinese imports from 145% to 30%, while China eased back from 125% to 10%. Investors exhaled, and industrial metals caught a bid. Copper futures rallied. Silver clawed back some ground. The risk of a full-blown trade war was, at least momentarily, off the table. According to RBC, the reprieve 'could be a step toward reducing the economic risk' that had been weighing heavily on the market. In short, the truce gave metals room to breathe - but it didn't change the game entirely. Beneath the surface, it's complicated Let's start with copper. On paper, it looks strong - up nearly 16% year-to-date. But that stat masks just how volatile the journey has been. After hitting all-time highs in March, copper prices nearly collapsed through the $4.00/lb level just weeks later. That's not the mark of a calm, balanced market, it's one riding a wave of uncertainty. Source: Trading view And then there's China. In April, the country imported nearly 3 million tonnes of copper concentrate - the highest monthly figure in five years and up 24% compared to the same period in 2024. Sounds bullish, right? Source: China's Customs Bureau, Bloomberg But here's the twist: smelters are paying to take this material. Yes, you read that correctly. Treatment charges - the fees miners pay smelters to refine concentrate - have flipped negative. Spot TC/RCs hit a record low of minus $57.50/tonne. That means Chinese smelters, despite gorging on supply, are effectively losing money just to stay in the game. And it's not just about supply and demand - it's about who's moving the pieces. Freeport-McMoRan resumed exports from its Grasberg mine after getting the green light from Indonesia, while a Glencore smelter outage in the Philippines rerouted even more cargoes to China. But this windfall may be short-lived. Freeport's domestic Indonesian smelter is set to come online by September, potentially cutting off a key source of Chinese feedstock. Silver's struggle to shine Silver isn't faring much better. While it briefly bounced on the back of a softer US dollar and growing Fed rate cut bets, that support is starting to wobble. With signs of easing global trade tensions, silver's appeal as a safe-haven asset is weakening. At the same time, silver's industrial role - particularly in electronics and semiconductors - is coming under pressure. The Trump administration's move to blacklist several Chinese chipmakers has raised concerns over demand for silver-heavy tech components. So while the metal hovers around $32, its footing looks increasingly fragile. Real-world friction in the scrap market Step away from the trading screens, and the confusion continues. In the US, scrap copper sellers are scratching their heads. They see copper trading at over $4.60/lb in New York and expect strong payouts - but recyclers are quoting prices based on London benchmarks, which are sometimes 40 cents lower. This disconnect has led to frustration and accusations of profiteering. But as Utah Metal Works president Mark Lewon puts it, 'We're not working on giant margins - we're just pricing to the real market.' With tariffs distorting flows and global benchmarks diverging, what sellers see on the screen isn't always what they get at the scrapyard. Some tariffs are now paused or cancelled, and that's narrowing the gap a bit - but the confusion is a symptom of a much larger issue: trade policy is still warping the way metal moves. Eyes on H2: Can the rally hold? All of this brings us to the heart of the matter: the second half of the year. JP Morgan notes that Chinese buyers have likely brought forward purchases in anticipation of tariff relief, which means demand could slow just as global supply rebounds. Freeport's in-country smelter, Glencore's recovery, and easing restrictions could all bring more metal to market. Add in a potential Section 232 tariff on US copper imports, and things get even trickier. JP Morgan warns that 'prices above $9,500/mt could face Chinese price sensitivity,' and expects that the micro tailwinds keeping copper prices afloat could start to unwind. For silver, the threat is more macro: if the Fed decides to hold rates steady and global trade stays stable, the safe-haven narrative weakens. And while industrial demand might prop it up to a point, tech restrictions and cooling chip demand could drag. Technical outlook: The Calm Before the What? The US-China trade pause was a welcome relief, but it hasn't solved the deeper imbalances lurking in the industrial metals market. Copper and silver have shown resilience, but their foundations remain shaky. Treatment charges are upside-down, demand is front-loaded, and policy risk still looms large. So, can industrial metals hold up if the truce falters in H2? They might. But don't be surprised if the ground beneath them starts to shift - fast. At the time of writing, Copper is experiencing a significant price slump within a sell zone, hinting at potential follow-up sells. However, the volume bars show that sell pressure is waning, hinting at a potential price reversal. Should the slump continue, prices could be held at the $9,328 and $8,950 potential support floors. Should we sound a price reversal, prices could encounter a resistance wall at the $9,660 resistance level. Source: Deriv MT5 Silver is also seeing a significant price slump in a sell zone, hinting at potential follow-up sells. The volume bars show that sell pressure is waning, hinting at a potential bounce. If the slump continues, prices could be held at the $31.65 and $31.10 support levels. Should we see a bounce, prices could be hit at the $33.95 resistance wall. Source: Deriv MT5 Disclaimer: The performance figures quoted are not a guarantee of future performance. The information contained within this blog article is for educational purposes only and is not intended as financial or investment advice. The information may become outdated. We recommend you do your own research before making any trading decisions.
Bloomberg
12-05-2025
- Business
- Bloomberg
China's Record Copper Ore Imports Offer Relief Amid Shortage
Chinese copper concentrate imports climbed to nearly 3 million tons last month, a record that's likely to ease price pressures in the domestic market and offer relief to smelters fighting over the availability of feedstock. Spot treatment charges at global smelters are deeply in the red, an unprecedented collapse caused by a rapid expansion in capacity colliding with a global shortage of ore. The heaviest concentration of plants is in China, where output of refined copper has hit all-time highs despite pledges to rein in production to rescue margins.
