Analysis of Long-Term Contracts in Copper Industry Chain 2021-2022

SHANGHAI, Nov 18 (SMM) – The copper concentrate TCs have begun to decline since 2015, which indicates that the supply of copper concentrate is tightening. TCs fell to a 10-year low in 2021. In 2022, as the COVID-19 eases and new mines are put into operation, the supply of copper ore in 2022 will increase from 2021. It is expected that the long-term contract TCs of copper concentrate will stop falling and rebound in 2022.

RCs of blister copper stemmed declines and rebounded in 2021 after falling for two consecutive years, due mainly to the increase in the supply of blister copper smelted with copper scrap. There is a big uncertainty over the RCs of blister copper in 2022. Due to serious logistics issues in Africa in 2021, local shipments decreased. However, it is expected that logistics will gradually recover and supply will increase by then. Meanwhile, the output of blister copper produced with copper scrap is expected to be lower than this year due to the supply tightness of copper scrap. The copper cathode output will need more blister copper next year.

SMM understood that Codelco plans to set the premium for long-term contracts of copper cathode to China in 2022 at $105/mt, much higher than the $88/mt in 2021. Many domestic traders have received offers, but none have accepted them. Codelco planned to set the premium for long-term contracts of copper cathode to South Korea in 2022 at $100/mt. We expect that in 2022, the premiums under long-term contract will rise to $100-105/mt.

The prices of long-term orders shipped by smelters to Shanghai rose slightly in 2021 compared to 2020. Smelters are unlikely to lower their prices for long-term contracts in 2022 amid the limited increase in imported copper and the increase in downstream demand for copper cathode.