Japan, China Copper Smelters Get New Tc/Rc

Indian copper smelter owners have cause to celebrate.

After a hiatus, global miners recently agreed to raise the treatment and refining charges (Tc/Rc) by 10 percent for the January-March 2013 quarter, following a recovery in copper mine supply after years of deficit.

A report in the Business Standard stated Pan Pacific Copper, Japan’s biggest smelter, had successfully negotiated a more than 10 percent increase in Tc/Rc for 2013 from global miners. It had been in negotiations since December 2012.

Similarly, China’s leading smelter, Jiangxi Copper, had also won a hike in the fees from global miner Freeport McMoRan Copper.

The Japanese charges have gone up from US $63.50 a ton (Tc) and 6.35 cents per pound (Rc) last year, to above $69.85 and 6.985 cents – well within the expected range of US $65-$75 and 6.5-7.5 cents range.

China’s Jiangxi Copper and Freeport McMoRan Copper and Gold settled Tc/Rc at US $70 per ton and seven cents per pound, up 10.2 percent from US $63.5 and 6.35 cents in 2012.

So why is this development good news for Indian smelters?

Because, analysts say, the new rates are bound to set new benchmarks for the rest of the smelters, including those from India like Hindalco Industries and Sterlite Industries. Most of these guys are set to get higher realizations for converting copper concentrate into virgin finished products like cathodes. So Indian companies are bound to get a better fee as Tc/Rc this year.

The treatment and refinery charges are the largest source of income for smelters. Also, the fee traditionally goes up when miners increase their output in anticipation of higher demand and push the same to smelters for conversion.

Makes sense, because if the supply of copper is lower, smelters need to keep looking for more and more of the metal in order to keep the furnaces burning.

This is exactly what MetalMiner had predicted earlier this year when we reported that 2013 could be the year when copper production would outstrip the demand.

In India, copper concentrate mines are restricted only to the government-owned Hindustan Copper. So Sterlite and Hindalco must depend upon copper concentrate supplied by other global miners. Consequently, their income fluctuates depending upon the availability of copper concentrate for conversion and smelters’ negotiating capability with global miners for Tc/Rc. 2011 was an especially bad year for the Indian copper sector following low demand.

The International Copper Study Group had also released a report recently, stating that while mine production was set to ramp up by 6.4 percent and refined production by 6 percent in 2012, refined usage would only rise by 1.5 percent, thus creating a surplus.

Further growth in mine production in 2013 would mainly be from production at existing mines rather than new projects, the report said.

by Sohrab Darabshaw