July 26, 2013 / 10:25 AM / in 4 years

Rising supply to boost China copper concentrate processing fees-trade

* Restart at Grasberg, startup of Oyu Tolgoi prompt offers

* Spot concentrates change hands at $72/7.2 cents TC/RC this week

* TC/RCs may rise to $90/9 cents in Q3 - smelter

By Polly Yam

HONG KONG, July 26 (Reuters) - Copper smelters in China are poised to raise by at least 10 percent the processing fees they charge sellers of raw material spot concentrates in the coming months as they take advantage of rising supply.

That could indicate ramped up capacity and higher output at these smelters, offsetting at least some of the lost output at smelters that use copper scrap as raw material due to a shortage of scrap. It may ultimately ease the metal import needs of the world’s top consuming and producing nation of refined copper.

Supply of concentrates has increased after Freeport-McMoRan Copper and Gold Inc’s Grasberg mine in Indonesia resumed near normal production and Mongolia’s giant new Oyu Tolgoi mine started shipping to China earlier this month.

Traders said offers of spot concentrates had risen further this week and sellers were willing to pay higher fees.

Reflecting the increased supply, treatment and refining charges (TC/RC) settled at $72 per tonne and 7.2 cents per pound this week for clean, standard spot shipments to China.

Spot TC/RCs had fallen below $70 and 7 cents in the past few weeks from $76.5 and 7.65 cents in mid-May as mining activity at Grasberg halted on safety investigations.

The charges are paid by concentrate sellers to smelters to convert concentrate into refined metal and their movements are directly co-related to supply.

“A lot of offers (to sell spot concentrates) came out this week,” said a trader at an international trading firm, adding that the offers came from international trading houses.

“Now TC/RCs are trading at low 70s,” the trader added.

The Grasberg mine restarted open-pit and underground mining earlier this month.

Adding to the supply is Oyu Tolgoi, which started shipments of copper concentrates on July 9.

Oyu Tolgoi, run by Rio Tinto and two-thirds owned by its Turquoise Hill Resources unit, would progressively ramp up during the second half of 2013 and expects to produce between 75,000 and 85,000 tonnes of copper in concentrate for the year, Turquoise said on July 15.

Rio Tinto is believed to have signed term contracts with three Chinese firms and at least one international trading house for providing Oyu Tolgoi concentrates, sources at Chinese smelters said.

The supply from Oyu Tolgoi will be vital to copper output in China since Chinese smelters are already facing a shortage of alternative raw material scrap and several have even cut production.

Top producer Jiangxi Copper Company Ltd , third-largest producer Jinchuan Group and fourth-largest producer Yunnan Copper announced closures of some capacity due to the scrap supply shortage.

Most smelters in China that use concentrate as feed currently are running near capacity and they would produce as much as they could in the second half as refined metal production made from raw material scrap falls, sources at smelters said.

A trader at an international trading house said TC/RC charges would rise to about $80 and 8 cents by September.

There were more bullish estimates.

“Spot TC/RCs are likely to rise to $90 and 9 cents in the third quarter,” a trading manager at a smelter in China said, adding supply of concentrate in the global market would rise as most expansion projects would come onstream in the second half.

Global copper mines are expected to produce 14.432 million tonnes of metal this year, which would be a rise of 9.3 percent, data complied by Reuters showed.

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