* Oversupply in Asia easing after Freeport's Grasberg mine
* Pace of rise in treatment and refining charges slows
* Oyu Tolgoi to begin shipments around end-June - source
By Polly Yam
HONG KONG, May 28 Chinese copper smelters are
turning to Rio Tinto's Oyu Tolgoi mine in Mongolia for
concentrates in the spot market as a regional oversupply
situation in the raw material is easing after a key Indonesian
mine halted operations this month.
The supply from Oyu Tolgoi, expected to begin in June, will
be vital to copper output in the world's top producer and
consumer of the metal since Chinese smelters are already facing
a shortage of alternative raw material scrap and several have
even cut production.
China had boosted purchases of spot concentrate in the Asia
market to benefit from a regional oversupply after India closed
its top smelter run by Sterlite Industries around
end-March over environmental concerns. But the extra supply was
drying up now, traders said.
"Trading houses are no longer desperate to sell," said a
trader at an international trading firm, who declined to be
named because he was not authorised to talk to the media.
Operations at Freeport McMoRan Copper & Gold Inc's
huge Grasberg mine in Indonesia, the world's second-biggest
copper mine, were suspended on May 15 after a tunnel collapse
that killed 28 people. It is not clear when operations at the
mine will restart.
Reflecting an easing of the oversupply, treatment and
refining charges for spot copper concentrate were up only
marginally recently compared with a 25 percent jump posted in
April from March. They were at $76.5 per tonne and 7.65 cents
per pound for clean, standard concentrate to China in mid-May
compared with $75 and 7.5 cents in April.
The charges are paid by concentrate sellers to smelters to
convert concentrate into refined metal and their movements are
directly co-related to supply.
Top producer Jiangxi Copper Company Ltd
and smaller rivals have already cut production in
the past month because of scrap supply shortage.
China's imports of copper ores and concentrate rose 37
percent on the year to 3.06 million tonnes in the first four
months of the year of which 23,074 tonnes came from Indonesia,
customs data showed.
Sources at Chinese smelters said the Grasberg operation
suspension was unlikely to affect term shipments to China.
The huge Oyu Tolgoi mine is expected to start shipments of
copper concentrates to China around the end of June, said a
source at a Chinese smelter, which will receive term shipments
of Oyu Tolgoi concentrates.
At full tilt the mine is expected to produce around 450,000
tonnes of copper and 330,000 ounces of gold a year.
Earlier this month Rio Tinto's Chief Executive Sam
Walsh said he expected approvals from the Mongolian government
within two weeks to transport copper out of the Oyu Tolgoi mine
and copper concentrate was being stockpiled at the mine awaiting
"It's still set for next month. They've been doing tests and
preparation but first shipment hasn't been done yet," a source
familiar with the approval process, said.
Logistics for transporting concentrates to China have been
completed mostly, said two sources at separate smelters, who
attended a presentation by Rio Tinto earlier this month.
Copper concentrates to be shipped to China will be examined
by officials of China's quarantine authority at the mine and
will be packed in bags, with three tonnes per bag. The bagged
concentrates will be transported to a bonded warehouse in the
Chinese border for deliveries to buyers, the sources said.
Rio Tinto is believed to have signed term contracts with
three Chinese firms and at least one international trading house
for providing Oyu Tolgoi concentrates, sources at Chinese
(Additional reporting by James Regan in SYDNEY; Editing by