Tokyo – Pan Pacific Copper (PPC), Japan’s top copper smelter, expects a global shortage in copper to be less acute next year as top consumer China’s output increases and its demand growth softens amid the prolonged U.S.-Sino trade row, a company official said.
PPC, which is also a miner and is controlled by JXTG Holdings (5020.T), projects the global consumption and supply of refined copper to climb by 1.5 per cent and 1.7 per cent respectively in 2020 compared with this year, Naoki Kojima, PPC’s general manager for marketing, told Reuters on Friday.
“China’s demand will continue to grow next year, but at a slower pace than this year and than we had expected last year,” he said, citing weaker industrial demand for the metal, widely used in power and construction.
“Still, Beijing’s economic stimulus, such as hefty spending in infrastructure and deregulation to bolster car purchases, will support metal demand,” he added.
China’s new smelting capacity, meanwhile, will help bolster global output, but the shutdown of the Indian company Vedanta’s (VDAN.NS) smelter and tighter concentrate supply will limit the gain, he said, forecasting a shortage of 38,000 tonnes worldwide in 2020, compared with 89,000 tonnes this year.
Kojima expects its term premiums to China next year to come near this year’s 86 dollars a tonne.
The world’s top copper producer, Codelco, set its 2019 term premiums to China at 88 dollars a tonne.
“Since the spot premium market was weaker early this year, we expect tough negotiations ahead,” he said. “But with a boost from China’s stimulus in mind, we want to negotiate in a range near the current level for 2020.”
He said the talks would start as early as next month.
PPC is also getting ready for difficult discussions later this year over treatment and refining charges (TC/RC) for 2020, said Shunji Iwanami, general manager for raw materials at PPC.
Copper miners pay TC/RCs to smelters to process ore into refined metal. Lower charges indicate a tighter copper concentrate market or ample smelting capacity, and are bad news for smelters.
China’s spot treatment charges for copper concentrate AM-CN-CUCONC, assessed by industry data provider Asian Metal, have fallen nearly 40 per cent so far this year to 55.50 dollars a tonne, well below the 2019 long-term benchmark of 80.80 dollars.
“With slumping spot prices, miners may not accept the same level as this year,” Iwanami said.
But with treatment charges between 50 dollars and 60 dollars a tonne, many smelters will book losses and need to cut production, he said.
“We are preparing for the talks with an aim to keep it above the 70 dollars mark,” he said.
He expects the copper concentrate market to be largely balanced or hit a small surplus later this year.
“We may eventually see tighter concentrate market as China’s new smelting facilities go online, but it may take a year or more,” he said.