Freeport settles six-year high copper charges for 2023 with Chinese smelters

Miner Freeport-McMoRan FCX has agreed treatment and refining charges (TC/RCs) of $88 a tonne and 8.8 cents per pound for copper concentrate supply in 2023 with Chinese smelters, four sources close to the negotiations said on Thursday.

Chinese buyers signed with Freeport included Jiangxi Copper Co. Ltd. 600362, Tongling Nonferrous Metals Group Co. Ltd. 000630 and China Copper, according to two of the sources.

The charges, paid by miners to smelters to process ore into refined metal, are the highest since 2017 and 35% higher than the 2022 benchmark, due to an expected oversupply of copper concentrate.

"The general view (previously) was around $80-$85 but the sentiment had shifted more towards the $85-$90 range in recent weeks," said analyst Craig Lang of consultancy firm CRU.

"It was quite a common view across the market that next year would see a surplus approaching 300,000 tonnes of copper concentrate," he said.

This year, the benchmark was set at $65 per tonne and 6.5 cents per pound, but China's top copper smelters had already lifted their floor TC/RCs in the fourth quarter to a five-year high at $93/9.3c due to a supply glut.

The TC/RCs benchmark, referenced in supply contracts globally, is usually taken from the first settlement between a major miner and a smelter in top copper consumer China in annual negotiations.

TC/RCs rise when more supply is available and smelters can demand better terms on feedstock.

"That is a fair outcome, the six-year high figures reflect the widening gap between supply and demand in the concentrate market," a Chinese smelter said.

Smelter executives on Thursday called on miners to pay higher TC/RCs to incentivise them to expand capacity and ensure long-term copper supply to the market.

Spot treatment charges in China (AM-CN-CUCONC) assessed by Asian Metal stood at $84.50 a tonne on Nov. 24, up 42% from the beginning of this year and higher than the annual benchmark for this year.

"We think the number is not reasonable. Although 88 is a good luck number in China, it is not representative of the market reality," said a miner.

Market participants have mostly expected the treatment charges benchmark to be between $80 and $90 a tonne.

They pointed to Teck Resources' TECK Quebrada Blanca Phase 2 project in Chile and Anglo American PLC's AAL Quellaveco project in Peru that would contribute to the rising supply of concentrate.

Freeport did not respond to a request for comment.

Jiangxi Copper, Tongling Nonferrous, and China Copper did not immediately respond to requests for comment.