MethodologyContact usLogin
Participants in the copper concentrate market, specifically traders, have secured tonnages for 2025 at “very low” treatment charges (TCs) on the expectation that the market will remain tight next year, sources told Fastmarkets on the sidelines of the annual CESCO Week conference in Santiago, Chile. Sources said multiple deals have been signed by traders for 2025 volumes and were heard to be done at TCs in the low single digits ($10s and $20s per tonne).
Fastmarkets has confirmed several of these deals, with sources directly involved in the transactions.
A trader said that others were offering to buy 2025 tonnages at percentages of the annual benchmark, adding that they had even heard one trader was offering to buy concentrate at a TC equivalent to half of whatever the 2025 benchmark is set at.
These levels are higher than current spot levels, but with 2025 more than seven months away and a number of uncertainties still in the market, a number of participants said they saw such deals as a gamble.
The deal numbers are also well below current long-term contracts signed against the 2024 industry benchmark of $80 per tonne. Spot TCs were in the $80s per tonne as recently as October 2023, but the latest calculation of Fastmarkets’ weekly copper concentrates TC index, cif Asia Pacific, was just $0.10 per tonne on April 19, a record low and down from $48.20 per tonne on January 5.
The collapse in TCs came as a result of acute supply disruptions, but also due to massively expanding smelter capacity, in India, China, and Indonesia, sources told Fastmarkets.
Participants noted that if the market was to turn, even marginally, and reach spot levels in the $40s or $50s per tonne in 2025, participants securing tonnages now at far below this level would come under pressure.
Multiple miner sources told Fastmarkets that they do not see the current market level as sustainable, and expect spot TCs to pick up in coming months and across next year. That being said no participants that Fastmarkets spoke to during CESCO Week expected TCs to return to anywhere near this year’s benchmark level of $80 per tonne.
“TCs are complicated for smelters, at least one smelter will shut,” a miner source said, adding that “TCs will go up again, these low levels just aren’t sustainable.”
Low TCs pressure smelters margins, and a number of sources told Fastmarkets that the currently low TCs could cause some smelters to become unprofitable.
At the same time, if TCs go up and traders have locked in low levels for 2025, they also may come under pressure, sources added.
“There are too many factors that are very volatile,” a second miner source said, adding that in these conditions “somebody has to fail.”
“Someone will run out of money, either a trader or smelter or both,” a third miner source said.
“We don’t want to be the ones who sell to a trader that runs out of money,” the third miner added.
The third miner also noted that smaller traders specifically may come under pressure and not be able to “soak up” large changes in the market next year, if they take aggressively low positions now.
Increased metal prices, the third miner source added, would also increase market capital needed by traders and add to the pressure on traders.
Other factors may also pressure traders; currently traders are supported by a wide contango in London Metal Exchange (LME) spreads, aiding their low spot TCs, but a second trader said traders could start to come under pressure should spreads start to narrow.
“Traders will be completely naked,” the second trader said.
The LME three-month copper price was most recently at $9,798.50 per tonne, with the cash/three month spread in a contango of $108.50 per tonne.
“Traders are the ones that take a risk,” the second trader said, but noted that traders have to take positions on market movements and take gambles.
The risk taken by traders is due, in part, to the perception that the concentrate market will remain tight across the rest of 2024 and also into 2025, meaning spot TC levels could continue to be low and by extension tonnages bought at around $10 per tonne for 2025 could pay off, sources told Fastmarkets.
A fourth miner source told Fastmarkets they expect TCs in spot concentrate sales to be below $10 per tonne until at least the end of the third quarter of this year.
The fourth miner source also said they expected spot TCs in the $10s per tonne for 2025 and even 2026, though noted this would be supported by higher levels being agreed on long-term contracts.
A fifth miner source agreed, stating they expected spot TCs for copper concentrates to remain below $30 per tonne across next year.
At the same time, a third and fourth trader told Fastmarkets that they expect the 2025 benchmark level to be agreed somewhere in the high $20s per tonne, meaning that tonnages secured for 2025 at and below the $20s per tonne would be sustainable.
The third trader said they “don’t see a massive recovery in TCs soon,” a view which was held by the majority of participants that Fastmarkets spoke to during CESCO Week.
“TCs this low are unsustainable and reflect an irrational market,” Fastmarkets analyst Andy Cole said, adding that potential smelter cutbacks could see a “modest recovery in TCs”.
Fastmarkets’ forecasts show TCs for 2025 ranging between $16 per tonne and $43 per tonne, pointing to no quick return to levels seen in 2023.
Sources said they expected a limited recovery on the supply side, but some noted that financial challenges on the smelter side, largely caused by the low TCs, could result in some smelter curtailments and help lift TCs. The closure of some smelters could ease the concentrate deficit and by extension help TCs to rise, according to sources.
But just how much TCs could recover was a question that many sources could not give a definitive answer to, with several pointing out that the concentrate deficit was acute enough to mean that TCs would not completely recover anytime soon.
Multiple sources highlighted that even if some of the supply issues reversed, for example if First Quantum’s Cobre Panama mine were to resume production, the market would still be tight and TCs would remain low.
Some also argued that traders would push to get concentrate now, no matter the TC, because the current supply tightness might leave traders more concerned about not having any tonnages to trade rather than agreeing to aggressively low TCs.
A sixth miner source told Fastmarkets that they expected the low TCs were being seen because traders were “scrambling” to get their hands on concentrate, more scared by a lack of material than unfavorable TCs.
This idea that traders were scrambling for material, lest they be left without 2025 tonnage, was shared by multiple participants.
The sixth miner source also highlighted that a small-sized trader could go bust if the market changes quickly, and the gap between their agreed TCs for 2025 and the spot market got too great.
Our global coverage, prices and forecasts give you the critical insights to understand what’s driving volatility and help you minimize risk and predict future trends. Get your free sample of our base metals forecast.