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Grupo Carso's copper refinery shuts in Mexico-sources
March 26, 2012 / 3:50 PM / 6 years ago

Grupo Carso's copper refinery shuts in Mexico-sources

March 26 (Reuters) - One of Mexico’s three copper refineries owned by Mexican billionaire Carlos Slim’s Grupo Carso shut earlier this month, causing a rash of enquiries from domestic consumers looking for material, according to U.S. and Mexico-based market participants.

The Cobre de Mexico plant, which used blister as raw material to make cathode, was shut for environmental and cost reasons, according to Mexico-based sources.

An employee at the plant, located in Atzcapotzalco in the outskirts of Mexico’s capital, told Reuters production had stopped, but did not give any other details.

Grupo Carso declined to comment on the closure. Grupo Carso owns the plant through its subsidiary Condumex, according to Reuters’ database.

It had not been producing at full capacity, which market participants estimated at 150,000 tonnes per year, before the shutdown, according to industry sources.

“We were waiting for the closure. It’s because it’s in the middle of the city. There should be some additional demand for cathode because of this,” a trader in Mexico said.

The refinery, which was Mexico’s oldest according to Reuters’ records, is one of only three in the country. The two other refineries are operated by Industrias Penoles and Grupo Mexico SAB de CV.

PERCEPTION OF SUPPLY TIGHTNESS

Any additional buying resulting from the closure is not expected to tip the supply-and-demand balance in the United States, but it has contributed to the growing perception of tightness in North America.

The interest has provided a bright spot for U.S. traders who had a less-than-upbeat start to the year.

Like 2011, many fabricators were happy with their stock levels for the first few months of the year and have been using up inventory from last year before turning to draw on their 2012 supply contracts.

“It has caused some flurry of activity,” said a U.S. trader, who has seen cathode trucked to the border town Loredo, Texas.

Due to safety and insurance concerns, suppliers will some times deliver metal to the border and leave their Mexican customers to organize their own logistics for the rest of the journey.

Given the absence of an uptick in overall demand, the market has watched with surprise as London Metal Exchange stocks, particularly in the United States, have fallen sharply so far this year.

Some 75 percent of total withdrawals were from the LME’s registered warehouses in the United States, Mobile, New Orleans, Chicago, St Louis and Baltimore.

Traders have attributed a portion of those withdrawals to shipments to South East Asian consumers replacing material lost due to the outage at Glencore’s 215,000-tonne per year Pasar smelter/refinery in the Philippines.

That plant has been shuttered since the start of the year due to a fire and is not due to reopen for another three months.

But they also say much of it is due to warehouse games, with material being moved either off-warrant or from one warehouse to another company’s facility, rather than reflecting genuine consumption.

Some of the cathode, albeit only a small portion of the total, is heading to Mexican consumers, who may have bought material to replace the lost Grupo Carso supplies, according to traders.

“Glencore’s gathering material for Pasar. On the other side, I heard there’s a copper refinery in Mexico shutting down,” said a New York-based trader of the increase in business levels.

“I’ve had enquiries from the Mexican market. Customers are asking for additional supply,” he said.

The interest has provided some temporary relief from pain inflicted from plunging premiums and rising stocks in China, which consumers 40 percent of the world’s copper, following the Lunar New Year holiday.

Premiums in the United States are between 4.5 and 5 cents per lb, although some traders said they are quoting as high as 6 cents.

“There seems to be some tightness there (in Mexico), but I don’t think it’ll be long term,” said a second U.S. trader describing business there as “good” and the U.S. market as “spotty”.

An impending planned shutdown of Rio Tinto’s Kennecott Utah Copper’s Garfield smelter in May has also contributed to the rise in activity.

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