UPDATE 1-Codelco to cancel some term copper shipments to China in H2-sources

Wed Jul 9, 2014 1:44am EDT

* To cancel 10,000 tonnes term metal shipments to China-source

* A roaster not working as expected, output hit -source

* BHP delaying some Q3 refined copper shipments -sources (Adds comments, BHP details)

By Polly Yam

HONG KONG, July 9 (Reuters) - Chile's Codelco has asked certain buyers of refined copper in China to cancel some term shipments scheduled for delivery in the second half of the year as the firm processes less ores from a new mine, three sources said.

The shortfall is likely to push Chinese importers to buy spot refined copper from the international market, underpinning global prices that have already risen more than 10 percent from this year's low in March.

Codelco, the world's top producer of copper, is likely to cancel a total of around 10,000 tonnes of refined copper due to continued problems at its new Ministro Hales mine, said a source who is familiar with Codelco's operations.

That would be about 3 percent of the firm's 2014 contracted term shipments to China, Codelco's biggest customer and the world's top copper consumer.

The miner has already cancelled more than 7,000 tonnes so far, said the source, who did not want to be named as he was not authorised to speak to media.

Codelco in Chile did not immediately respond to calls and emails seeking comments.

"Codelco asked us and wanted to cancel a bit every month, or any months we can," a China-based copper trader who works for an international trading firm said.

Another China-based source also confirmed that Codelco had asked certain clients in China to cancel some term shipments scheduled for delivery in the second half.

Codelco had cut term shipments to China in the first half of this year as well, on concerns over production at the Ministro Hales mine.

The source familiar with Codelco's operations said a roaster built to process high arsenic ores from the new Ministro Hales mine was not working as expected, hurting the company's refined copper production.

The roaster had been expected to be fully operational in the second quarter of 2014 but it continues to have some technical problems, he added.

BHP TERM SHIPMENTS

However, Codelco is not the only supplier facing problems with delivery, sources said.

Some buyers in China have also been asked by global supplier BHP Billiton to delay term shipments of refined copper scheduled for delivery in the third quarter, two sources said.

A source at a large factory which uses refined copper to manufacture semi-finished copper products said the company was looking to import spot copper because BHP would delay 2,000 tonnes of term metal due to arrive Shanghai in August.

The buying could boost spot premiums, which have already risen more than 40 percent from mid-June to $130-$150 per tonne over cash London Metal Exchange for refined copper due to arrive Shanghai soon, traders said.

A Melbourne-based BHP spokeswoman said the company did not comment on commercial arrangements. (Additional reporting by the Santiago bureau; Editing by Himani Sarkar)

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