Sellers Keep Lowering Offers of TCs on Aggravating Disruptions to Copper Concentrate Supply

TCs of spot copper concentrate have been falling since the fourth quarter of 2022 as a result of constant disruptions to the supply of copper concentrate overseas. As a solid evidence, SMM imported copper concentrate index has dropped for nine consecutive sessions from a high of $91.08/mt recorded on November 25, 2022. Specifically, SMM imported copper concentrate index (weekly) stood at $80.73/mt as of February 3, and SMM imported copper concentrate index (monthly) reported $83.22/mt for January, a decrease of $4.53/mt from the index in December 2022.

Political protests in Peru, weather disasters in Asia and power rationing in Africa disrupted raw material production

The roads for transportation connecting MMG's Las Bambas copper mine (copper concentrate output in 2022 was 182,000 mt in metal content) were blocked due to political protests in Peru, and the transportation of auxiliary materials has been completely disabled. Coupled with the accumulating copper concentrate inventory at the mine site, Las Bambas suspended the production starting from February 1. When to resume the production depends on whether the protests can end as soon as possible and whether the subsequent negotiations with surrounding communities will lead to a valid agreement.

Although the Antapaccay copper mine affiliated to Glencore (with a copper concentrate output of 151,000 mt in metal content in 2022) was also affected by political protests and demonstrators, the production remains unaffected. Transportation is the most outstanding issue at present, which has already resulted in shipment delays. According to foreign media, the Antapaccay copper mine resumed normal operations on February 7, which may promote the resumption of Las Bambas. 

In second half of January 2023, Indonesia was hit by a geological and meteorological disasters accompanied by a secondary disaster. Therefore, Batu Hijau copper mine in Indonesia (copper concentrate output of 200,000 mt in metal content in 2022) curtailed the production and was unable to deliver in time. SMM believes that the Batu Hijau copper mine may resume the production by the end of March or early April. Fortunately, Batu Hijau’s copper concentrate targets mainly Japan and South Korea for its high content of gold, that is, the production disruption will not have a significant impact on China’s copper concentrate supply. 

According to SMM research, Congo (DRC) introduced power rationing after the Chinese New Year holiday, which has weighed on the production at the Kamoa-Kakula copper mine (the output of copper concentrate was 333,000 mt in metal content in 2022). The impact on copper concentrate production, the duration of the impact and the reasons behind power cuts are under investigation.

Overseas copper concentrate shipment delays rattle verves of domestic players

On December 23, 2022, a fire broke out at the port of Ventanas, Chile, which burned the conveyor belt and severely damaged the port's capacity. In order to restore the copper concentrate shipments as soon as possible, Anglo American temporarily leased two sets of "grab bucket" equipment to make up for the transportation capacity in addition to using container shipment, and around 30-50% of the port’s capacity could be resumed, according to SMM research. 

The Matarani port in Peruit was once reported to be unable to operate when the weather does not allow years ago for lack of breakwater. Recently, due to the political protests and demonstrations in Peru that affected the Matarani port, the ships have been unable to berth/leave or load/unload. This in turn caused delays in shipments from Glencore's Antapaccay copper mine and Constancia copper mine (copper concentrate output of 90,000 mt in metal content in 2022). According to SMM understanding, some of Antapaccay copper mine’s cargoes originally scheduled to be shipped in January have been postponed to February, and a market participant expects to the shipments to resume in early February.

First Quantum and the Panamanian government had been fighting back and forth over the $375 million in taxes and fees for the Cobre Panama copper mine (with a copper concentrate output of 361,000 mt in metal content in 2022). On February 7, 2023, the Panama Maritime Authority issued a resolution requiring the suspension of port shipments for Cobre Panama copper mine. According to SMM research, Cobre Panama Copper Mine has been producing normally even when First Quantum had disputes over tax issues with the Panamanian government. In addition, the Cobre Panama copper mine's port shipments are expected to resume by mid-February.

Market rumours prove false that China will cancel import restrictions on Australian copper concentrate

Rumour that China will cancel import restrictions on Australian copper concentrate attracted massive attention from market players several weeks ago. However, this rumour is proved false after SMM's cross-validation and multi-party verification.

Previously, SMM believed that the relatively sufficient raw material inventory held by Chinese smelters could walk them through the constant production and shipment disruptions overseas on the supply side. However, the incapability of sea transportation of copper mines in South America has seriously worried some domestic smelters about the delivery of long-term orders, which has further boosted the demand for seaborne clean ore shipped in the first quarter. Just like SMM has anticipated, although a smelter booked the copper concentrate to be shipped in the first half of 2023 under long-term contract in late 2022, one ship carrying clean ore leaving Chile was nearly late in arrival in China. Therefore, in order to mitigate the risks as much as possible, the smelters have ramped up the inquiries for clean ore shipped in the first quarter. The recent aggravating supply disruptions have rattled the nerves of market players. As a result, the sellers’ offers of TCs of seaborne clean ore to be shipped in the first quarter have dropped from some $78/mt in mid-January to around $75/mt at present. However, the buyers’ bids came in at $81-85/mt. 

It is almost a foregone conclusion that SMM imported copper concentrate index will fall below $80/mt to the range of $75-79/mt. Nonetheless, it is expected that the index will rebound in the first half of the second quarter as domestic leading copper smelters like Daye Headquarters, Jiangxi Copper, Tongling Jinguan, Fuye and Heding Copper will carry out maintenance around the end of the first quarter, and overseas supply will also gradually resume from multiple disruptions.