China's top copper smelters on Thursday raised their floor treatment and refining charges (TC/RCs) for the first quarter of 2020, arguing that cuts in production meant there was less demand for copper concentrate, according to two people with knowledge of the matter.
The China Smelters Purchase Team (CSPT) agreed to set the first quarter treatment charge floor at $67 per tonne and the refining charge floor at 6.7 cents a pound at a quarterly meeting, said the sources, who declined to be identified as they are not authorised to speak to the media.
Copper miners pay TC/RCs to smelters to process their copper concentrate into refined metal. Charges go down when the market tightens and rise when ore supply is more abundant. The 12 state-backed members of the CSPT are supposed to adhere to the floor charges in any spot copper concentrate deals. The agreed rates are up 1.5% from $66 a tonne and 6.6 cents a pound, respectively, in the fourth quarter of 2019 but down 27.2% year on year following a big rise in smelting capacity in China and limited mine supply growth this year.
Spot copper TCs are currently languishing near seven-year lows at around $58.50 a tonne, as assessed by Asian Metal, squeezing smelters' margins.
The annual TC benchmark for 2020 - used in long-term supply contracts - was agreed at $62 a tonne by miner Freeport McMoran Inc and Chinese smelter Jiangxi Copper in Shanghai last month, the lowest benchmark since 2011.
The CSPT decided to raise the spot TC/RC floor slightly because at least two smelters in China had recently cut production, according to the sources, who named the companies as private producer Shandong Fangyuan Nonferrous Metals Group and CSPT member Zhongtiaoshan Non-ferrous Metals Group.
"It wasn't mentioned at the meeting how much they have cut production by," one of the sources said. Fangyuan, which has said it is experiencing liquidity problems but that its production is stable, declined to comment on Thursday.
Zhongtiaoshan, based in China's northern Shanxi province, did not immediately respond to a request for comment. China produced a record amount of refined copper in November, in which it also imported an all-time high of 2.16 million tonnes of copper concentrate. Chinese smelters are set to add 900,000 tonnes of annual smelting capacity this year and could add another 350,000 tonnes in 2020, according to Chinese research house Antaike.
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