* Deal could help Trafigura boost China business
* Agreement includes concentrate supply and metal off-take
* Smelter has designed capacity of 400,000 tonnes a year
(Adds comment, detail)
By Polly Yam
HONG KONG, Feb 21 Global commodity trader
Trafigura said it would buy 30 percent of Jinchuan Group's
copper smelter in southern China, the first time a foreign firm
has taken a major stake in such a facility in the world's top
consumer of refined copper.
The deal, for an undisclosed amount, comes as the
Switzerland-based company looks to get a leg up on international
rivals such as Glencore Xstrata and Louis Dreyfus
Commodities in doing business in the world's No.2 economy.
The move includes an agreement that traders estimate could
secure Trafigura annual sales to the smelter of up
to half a million tonnes of copper concentrate, as well as the
purchase of 120,000 tonnes of refined metal that it could sell
in China or export to Asia.
That would increase Trafigura's sales of copper concentrate
to China by a third from about 1.5 million tonnes a year
currently, they said.
"Trafigura would benefit a lot from the deal because it
could boost its copper concentrate selling and help it get a
hold of metal to sell in China," said a trader at an
international trading firm that competes with Trafigura in
selling concentrate to China. He declined to be named.
"I don't think a lot of international traders could follow
suit given the size of financing that was probably involved."
Both Trafigura and Jinchuan, China's third-largest copper
producer and top maker of refined nickel, declined to comment on
the size of the deal, which is subject to regulatory approval.
The 400,000 tonnes a year smelter is part of a 30 billion
yuan ($4.9 billion) complex being built by Jinchuan, the parent
of Hong Kong-listed Jinchuan International, in
Fangchengang in the southwestern region of Guangxi.
It is expected to house total annual capacity of 600,000
tonnes of copper and 110,000 tonnes of nickel, according to a
local government website (www.fcgs.gov.cn).
Trafigura in December signed a deal to secure supplies of
copper concentrate from the massive Oyu Tolgoi mine in Mongolia,
but the mine's distance from Guangxi could make it too expensive
to transport material to Fangchengang.
A source in China familiar with operations at the smelter
said that prices in the multi-year so-called supply and off-take
arrangement would be set in reference to market prices.
He added that despite access to China's markets, Trafigura
might also ship a lot of refined copper from the smelter to
The smelter was still in trial production and was expected
to start normal output after June 2014, he said. It is slated to
produce about 200,000 tonnes of refined copper in 2014.
But the smelter was unlikely to boost Jinchuan's production
in 2014 as it has already closed 300,000 tonnes of copper
capacity in the northwestern province of Gansu, home of
Jinchuan, the source said.
The Gansu facilities are now expected to churn out less than
400,000 tonnes of refined copper this year, compared to more
than 500,000 tonnes in 2013, he added.
($1 = 6.0834 Chinese yuan)
(Editing by Joseph Radford)