SYDNEY Feb 18 Buying interest from Indian and
Japanese smelters for spot shipments of copper concentrate has
picked up in recent weeks on growing jitters that an impasse
over Indonesian supply may be drawn out, traders said.
Indonesia in mid-January slapped a new tax regime on exports
of copper concentrate as part of a strategy to boost value from
its mineral wealth. Export taxes are set rise to 60 percent by
the end of 2016, before a complete ban from 2017.
Global miners Freeport McMoRan Copper & Gold and
Newmont Mining Corp have said the new regulations
conflict with contracts they signed with Indonesia that exempted
them from new taxes or duties. Both have halted shipments while
they negotiate with the government.
But with talks stretching out, and bookings for April
shipments set to pick up as top refined copper producer China
cranks up for its peak second quarter, some smelters are looking
to secure their needs, traders said.
"There's been a lot more stirring in the markets. We've had
more people picking up the phone and asking, 'If we were to buy
from you, what would be your terms,'" one concentrates trader
Mine supply tends to undershoot expectations each year
because many copper deposits lie deep beneath the earth's
surface or are in emerging market countries where sudden
regulatory changes can hit production.
Although the market is expecting a flood of mine supply this
year, traders are watching developments in Indonesian closely.
The country is a major regional supplier of copper
concentrate, with Freeport and Newmonth accounting for nearly
all of its output.
TREATMENT CHARGES FALL
Traders said that bids for new shipments have fallen to
double digits, from treatment and refining charges (TC/RCs)
that have held around the $105-$110 per tonne and 10.5-11 cents
per pound mark for the past month, indicating smelters are
prepared to earn less to win concentrate.
The charges dropped from $130 and 13 cents in December 2013
to $100-$105 in mid January after the tax was announced.
"The Indians and Japanese have some buying interest but not
more than what's available on spot or adjustable in ...
advancements," another trader at a merchant said, adding that a
Philippines smelter that closed after Typhoon Haiyan late last
year had also started to accept deliveries.
Global miners or trading houses pay TC/RCs to smelters to
convert concentrate into refined metal, with the charges
deducted from the sale price, based on London Metal Exchange
copper prices .
Charges typically fall when concentrate supply tightens.
Goldman Sachs estimates that the market is losing around
25,000 tonnes from Freeport's Grasberg operations and 10,000
tonnes from Newmont's Batu Hijau each month, although it
estimates a large global buffer of concentrate of more than
"To some extent Newmont and Freeport have managed to
mitigate it. They foresaw this happening, their shipping
schedules for exports have been geared towards the latter half
of Q1 and into Q2.. But obviously, time is ticking," a third
Some analysts don't expect a resolution of the shipments
issue ahead of Indonesia's parliamentary elections in April and
possibly until a new President is in place by October.
"We now see any backtracking of a nationalist policy such as
the minerals export ban unlikely prior to the completion of the
election process," said Macquarie analysts attending an
Indonesian mining conference, in a research note overnight.
But there may still be some movement before then.
Freeport said earlier this month that it would look at
building a new copper smelter, one of the demands of the
Six companies affected by the minerals ban, which includes
minerals other than copper, have also begun the process of
applying for export permits, which could be approved as soon as
next month, a senior government official said this week.