* Spot TC/RC at $75 and 7.5 cents, up a quarter from March
* China smelters aim for TC/RCs as high as $85 and 8.5 cents
* Rising fees could boost refined copper production
* Higher fees encourage Asia smelters to buy more spot
By Polly Yam
HONG KONG, April 23 Smelters across Asia are
charging the highest fees in five months to process copper
concentrate, cashing in on regional oversupply after India
closed its top smelter over environmental concerns.
Rising fees are likely to encourage some smelters in Asia to
boost refined metal production, potentially swelling London
Metal Exchange stocks which are already perched near decade
But they should only have a limited impact on China's total
output as many smelters there are already running close to
The hike in fees foreshadows a copper market surplus
expected in the second half, swinging away from several years of
deficit as top global mines such as Chile's Escondida boost
Treatment and refining charges (TC/RCs) for spot raw
material copper concentrates have climbed to $75 per tonne and
7.5 cents per pound in Asia for clean, standard concentrate,
above the benchmark $70 and 7 cents in Asia for 2013 shipments,
and up a quarter from March, industry sources said.
Shigeru Oi, senior executive officer at Pan Pacific Copper
, Japan's top copper smelter, said rising fees are
unusual in the spot market at this time of year.
Chinese buyers usually step up spot purchases in the first
and second quarters, tightening the supply/demand balance and
putting downward pressure on spot TC/RCs, but this year is
different partly due to the supply glut, he added.
"The toxic issue at Tuticorin in India and a halt at the
Nchanga smelter in Zambia have added to concerns over the supply
surplus," he said.
India ordered Sterlite Industries to shut its
smelter in Tuticorin over allegations of a gas leak. A
fast-track environmental court will again consider a request to
reopen the plant on April 29.
Zambia's Konkola Copper Mines, owned by London-listed
Vedanta Resources, said on Tuesday its Nchanga smelter
would remain shut for a month after a small leak in the wall of
Concentrate sellers pay TC/RC to smelters to convert
concentrate into refined metal, with the charges deducted from
the sale price, based on LME copper prices . The
charges, seen as a barometer for profit margins at smelters,
usually rise when supply increases.
Rising fees also reflect jitters on the part of the
Tuticorin smelter's suppliers, who, worried the shutdown could
stretch on for months, have opted to resell their material
before more supply hits the market, traders and China smelter
Chinese smelters have so far bought most of the surplus
concentrate, snapping up at least four shipments of
10,000-25,000 tonnes each so far this month, according to
Several sources said they expect TC/RCs to rise further.
"China is now are asking $80-$85 and 8-8.5 cents," said a
trader at a global trading house, whose firm had sold shipments
to China at $75 and 7.5 cents.
He declined to be identified because of the sensitivity of
"Our next target deal is $80 and 8 cents as two Chinese
smelters already got $75 and 7.5," a trader at a medium-sized
Chinese smelter said, adding that overseas sellers had been
offering to China aggressively after the Indian smelter closed.
Still, other sources questioned the sustainability of higher
processing fees in China.
"One of the Chinese smelters says they figure clean grades
are around $75/7.5, but we figure that is a little bit
aspirational," said another trader at a global trading house.
"Certainly we've seen high 60s being done. You tend to see
things moving to a more aspirational level before they settle
down to reality in China," he said.
The trader added that processing fees had climbed sooner
than expected because of a weaker demand environment and because
the Sterlite shutdown had increased the supply of available ore.
"The question is whether or not it will be sustained. I
don't think you'll see a lot of fall off between (prices) now
and where they'll end up in the second half of the year," he
Processing fees elsewhere in Asia have also begun to climb.
LS-Nikko Copper was mulling buying spot concentrate to take
advantage of high TC/RCs, said a source at the top smelter in
The source declined to be identified because of the
sensitivity of the matter and did not provide the tonnage the
firm was looking to buy.