By Paul Ploumis 07 Aug 2015 Last updated at 08:45:20 GMT
TOKYO: Japan's biggest copper smelter, Pan Pacific Copper, expects prices for the metal to recover this year to above $6,000 per tonne due to supply problems announced in recent weeks, its president Yoshihiro Nishiyama said on Friday.
Benchmark copper on the London Metal Exchange hit a six-year low at $5,121 this week on worries over demand from top consumer China and a strong dollar.
"The market is paying too much attention to China's consumption, which, we think, is not as weak as the market sees," Nishiyama told Reuters in an interview.
"Our copper business in China has slowed down a bit, but we don't have a sense that consumer spending has depressed sharply," he said.
Pan Pacific altered its 2015 global supply-demand outlook for the metal, used in power and construction projects, to a surplus of 100,000-200,000 tonnes from its earlier estimate of nearly-balanced, Nishiyama said.
But he still expects a pick-up in the metal prices later this year because of supply problems such as at Chilean state copper firm Codelco's newest project Ministro Hales, where striking contract workers have seriously damaged important mine equipment.
Papua New Guinea's state-owned Ok Tedi Mining may also have to suspend operations at its copper mine because of dry weather and low water levels on the Fly River.
"Because of slumping copper prices, some small copper miners in China have also halted operations," Nishiyama said.
Power outages, strikes, floods and drought as well as lower grade source material are tightening copper supplies, potentially pushing the market into a supply deficit earlier than expected.
Nishiyama said copper processing fees for 2016 may fall below $100 due to the weak spot market, although Pan Pacific could aim at that mark given the expected rise in ore supply.
"But it's still too early to talk about a specific level," he said.
Treatment and refining charges (TC/RCs) fetched by Pan Pacific, a unit of Japan's JX Holdings Inc, are likely to set the tone for others in the region, including smelters in China, the world's biggest consumer of the metal.
Global miners pay TC/RCs to smelters to convert concentrate into refined metal. Higher fees are typically seen when concentrate supply rises or available smelter capacity thins.
TC/RCs for 2015 were at $107 a tonne and 10.7 cents a pound, up 16 per cent from $92 and 9.2 cents for 2014.
Courtesy : www.economictimes.indiatimes.com