Semi-annual Market Review of Copper Concentrates [SMM Analysis]

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       At the beginning of this year, the spot processing fee for copper concentrates officially entered a negative era. The transaction price at the smelter's purchasing end fell from a single-digit low at the beginning of the year to a mid-range negative $40 US dollar, and has been lingering around the mid-range negative $40 US dollar since late April, making it difficult to fall further. However, the transaction price at the trader's purchasing end has repeatedly hit new lows. With the asymmetry in the supply and demand structure of the copper concentrate market, mines have allocated more positions for spot tenders. Additionally, there have been aggressive new entrants in the copper concentrate market this year, leading to a decline in the trader's purchasing price from -$80 US dollar to -$140 US dollar.

       On the supply side of copper concentrates, the soaring copper prices have alleviated production conflicts at mining sites and provided motivation for Indonesia to relax its copper concentrate export policy. Although supply risk incidents have occurred from time to time in H1, conflicts due to human factors have not been prominent.In mid-to-late March, the Indonesian government stated that it would issue a six-month copper concentrate export permit to Freeport Indonesia. Today, Freeport Indonesia stated that it had obtained an export permit for 1.27 million ore tons of copper concentrates from the Indonesian Ministry of Trade, meaning that ships loading copper concentrates at Freeport's port are allowed to commence shipment. At the same time, a 7.5% export royalty on the cargo value will be imposed on copper concentrate sellers. In late March, a mining accident occurred at the East Zhezkazgan mine in the Ulytau region of Kazakhstan, which is operated by KAZ Minerals. East Zhezkazgan suspended production (East Zhezkazgan produces 600 mt (metal content) of copper per day). In early to mid-April, a worker died at KGHM's Sierra Gorda copper mine in Chile, but this did not affect Sierra Gorda's production plan. Sierra Gorda has four Larox filters operating lines. Before the accident, it was already planned to shut down one of the Larox filters for maintenance, while the other three continued to operate. In early June, a mechanical failure occurred at Carmen de Andacollo copper mine operated by Teck Resources, and the mine needed to shut down the SAG mill for repair. Production is expected to be interrupted for about a month due to the maintenance. Hudbay Minerals stated that due to the frequent occurrence of forest wildfires in Canada, it has suspended production operations at the Snow Lake polymetallic mine. The miner will resume full production operations when conditions permit. The 2025 production guidance for Kamoa-Kakula copper is 370,000-420,000 mt (metal content), a decrease of 28% from the production guidance of 520,000-580,000 mt (metal content) released at the beginning of the year. In early July, specifically on July 10, the Phase II expansion project of the Mirador copper mine operated by Tongling Nonferrous Metals Group progressed normally as planned, and heavy-load commissioning was carried out in July.

       On the demand side of copper concentrates, the divergence in operating rates between domestic and overseas markets has intensified. Expectations for production cuts at Chinese copper smelters have weakened, while expectations for overseas production cuts have strengthened.In January this year, Glencore's Pasar smelter in the Philippines halted production until July. Glencore is currently negotiating with the local Villar family regarding the sale of the Pasar smelter. Glencore's Altonorte smelter in Chile underwent maintenance for approximately one month due to the need to replace furnace bricks following the last major power outage in Chile, resulting in a shutdown of the smelting process for at least two weeks. In late May, Tongling Nonferrous Metals Group's Jinxin smelter commenced furnace operations. In early June, Sinomine Resource Group announced that due to a shortage in copper concentrate supply, its Tsumeb copper smelter in Namibia had temporarily suspended copper smelting operations. In mid-to-late June, according to official news from JX Advanced Metals Corporation, considering the decline in profitability of copper concentrate smelting in recent years, the company is actively promoting an increase in the proportion of high-margin raw materials for recycling. However, due to the significant deterioration in ore purchasing conditions, the group has begun to consider implementing production cuts at its operating smelters. After multiple delays in feeding materials, India's Adani copper smelter resumed feeding on June 16, with an annual capacity of 500,000 mt. In mid-July, Shenghai Chemical smelter resumed production after a half-month furnace preheating period.

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