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China copper smelters hike Q4 treatment charge floor ahead of 2020 talks

China's top copper smelters on Thursday raised their floor treatment and refining charges (TC/RCs) for the fourth quarter of 2019 by 20% from the previous quarter, according to three people with knowledge of the matter.

By Tom Daly and Mai Nguyen

KUNMING, China/SINGAPORE, Oct 17 (Reuters) - China's top copper smelters on Thursday raised their floor treatment and refining charges (TC/RCs) for the fourth quarter of 2019 by 20% from the previous quarter, according to three people with knowledge of the matter.

The China Smelters Purchase Team (CSPT) set the treatment charge floor at $66 per tonne, and the refining charge floor at 6.6 cents a pound at a meeting in Shanghai, said the people, who asked not to be identified due to the sensitivity of the matter.

That was up from $55 a tonne and 5.5 cents a pound in the third quarter, but still below the $90 a tonne and 9 cents a pound set for October-December 2018.

Copper miners pay TC/RCs to smelters to process their ore into refined metal. Higher charges indicate more abundant supply or that smelters have less need for concentrate.

The floor price agreed on Thursday also serves as an indication of the position that smelters in China, the world's top copper consumer, will take in negotiations on a TC/RC benchmark for 2020, used for longer-term deals.

The hike in charges came a surprise, a source at a large mining firm said, given recent supply disruptions and a decline in spot TC/RCs AM-CN-CUCONC over the course of this year.

"I don't think they can buy a lot of tonnes of clean concentrate at that spot number," the source said, adding that he saw no fundamentals-based rationale behind the move, especially given a supply disruption at the giant Las Bambas mine in Peru.

Smelter expansions in China, including Zijin Mining's 2899.HK601899.SS recent launch of a 150,000 tonnes per year plant in the northeastern city of Qiqihar, has also added to competition for concentrate.

Spot TC/RCs have fallen around 38% since the start of this year at $56.50 a tonne, squeezing the margins on smelters with heavy exposure to the concentrate spot market.

CSPT members are supposed to adhere to the floor charges in any spot processing deals.

(Reporting by Tom Daly in Kunming, China and Mai Nguyen in Singapore; Additional reporting by Melanie Burton in Melbourne; editing by Richard Pullin)

((tom.daly@thomsonreuters.com; +86 10 5669 2119;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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